Getting workers back to the office in the U.S. hasn't been easy since the pandemic. Most of the success in the revival has been seen from highly amenitized assets, which are often categorized in Class A or Trophy tiers — but Colliers picked up on an interesting trend in Minneapolis-St. Paul — offices near waterfronts.
In an analysis, the brokerage found that those types of properties in the sector are outperforming Class B's in key fundamental areas. This includes vacancy, where waterfront offices are 140 basis points below Class B's in the metro, maintaining a rate of just 23.5 percent. Also, the $31.64 asking rate per square foot full service gross outpaces the Class B average of $29.41. The CRE firm did not focus on Class A waterfront properties because the supply of these is scarce and tough to analyze.
"Being closer to the water, with access to walking trails, outdoor patios, and other waterfront amenities attracts tenants, and these buildings are best able to push their asking rates above the market average," Colliers wrote.
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It's unclear how these numbers compare to Class A or Trophy assets — but waterfront properties account for 5.2 percent of the Class B stock in Minneapolis-St. Paul, according to Colliers. More than three million square feet of office space is located near a body of water in the metro.
Colliers also notes that Minnesota is known for its lakes and hosts 10,000 of them. So there could be more potential for developers here.
Overall, it's evident that the highest quality offices are performing the best in the post-pandemic world nationally. But perhaps, the waterfront trend is worth paying attention to, plus the surrounding area, rather than just the features and the amenities buildings themselves.
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Anthony Russo
Anthony Russo has been contributing to GlobeSt. since July 2024. Along with CRE, his financial background expands to capital markets, the economy, and consumer issues. Previously, he has written for CapitalWatch and was a senior reporter for The US Sun.
