MINNEAPOLIS-Office vacancy rates are expected to continue to rise in Downtown and the southwest suburbs, two key sectors of the Twin Cities market, and could top out in the high teens. Otherwise, most other submarkets are at or near their peak vacancies, says Mike Ohmes, vice president of brokerage services for United Properties.

“We have yet to see the peak in vacancy rates in downtown Minneapolis and the Southwest submarketduring this phase of the economic downturn,” he says. “However, we do project vacancies to be at or neartheir peaks in other submarkets, most notably the West and Northwest and in St. Paul and its surroundingsuburbs.”

Metro area-wide, the year-end vacancy rate for all types of multi-tenant office buildings is projected tobe 12.7%, 2.7 percentage points higher than the 10% vacancy ending last year, according to a new outlook study put out Wednesday by the commercial real estate firm based in Bloomington, MN. Adding in spaceavailable for sublease and the overall year-end vacancy rate is projected to be 15.2% versus 11.9% atyear-end 2000.

A surge in sublease space pushed vacancy rates up in both the Minneapolis Central Business District and the Southwest submarket, according to Ohmes. In Minneapolis, for instance, the vacancy rate is at 11.8%, up from 9.2% a year ago, and is expected to rise to 16% to 17% by end of next year.

Vacancies increased in all geographic submarkets, although just slightly in the Northeast, Northwest and West submarkets.

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