MINNEAPOLIS—The winter cold snap endured by most of the US hitMinneapolis particularly hard, forcing its economy to contract 2.9%during the first quarter. But with the coming of spring, the metroarea rebounded and activity in its office market accelerated,according to a report on the second quarter by CassidyTurley.

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The local unemployment rate, for example, already far below thenational average, continued to drop and hit just 4.39%, the lowestrate since 2007. And the multi-tenant office market absorbed385,000-square-feet in the second quarter, bringing the overallmetro office vacancy rate to 15.7%, lower than the historicalaverage of 17.9% and the first time it has been below 16% since thefourth quarter of 2007.

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“The gains in office space this past quarter were primarilyrealized in the Southwest and West/ Northwest submarkets,”according to the report, and “class A office space led the way withnearly 290,000-square-feet absorbed this quarter.”

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Furthermore, the decline in vacancies was mirrored by risingrental rates. The metro average is now nearly $1-per-square-foothigher than at this time last year. But the big story in the localoffice market, according to Cassidy Turley researchers, “wasundoubtedly the uptick in office sales, and the price they aretrading at.”

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As reported in GlobeSt.com, for example, KBS REIT II,Inc. sold 601 Tower at Carlson Center in suburban Minnetonka toArtis REIT for $75 million, a 39% increase overthe price KBS paid for the 288,458-square-foot property in 2011.This was one of the highest prices ever paid in terms ofper-square-foot value in the Twin Cities, according to CassidyTurley. And several weeks later, 50 S. 10th St. in the MinneapolisCBD sold for a price of $164.5 million. Its buyer paid more than$365-per-square-foot, by far the most ever in the state.

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And these sales were just the continuation of a 2013 trend, whenmajor office properties traded at a pace not seen since before therecession. For example, Florida-based Beacon InvestmentProperties LLC bought the iconic IDSCenter for $253 million. Other major sales included theOracle Centre, a 20-story building at 900 SecondAve. South, which was sold to a joint venture betweenInvestcorp International and WildamereProperties, and the 40-story RBCPlaza.

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“As we look ahead,” the researchers concluded, “we expect to seemore office buildings trade hands at historically high rates.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.