Any level of positive absorption is a strong indicator ofreturning demand--particularly following a two-year period ofnegative 2.7 million sf of office absorption, according to theBloomington-based commercial real estate firm. The office marketposted its first declining vacancy rates since 1997 with year-end2004 levels of 18.3% direct vacancy or 20.7% vacancy with subleasedspace included, compared to year-end 2003 vacancy rates of 18.9% or21.6% with subleased space.

Four of seven Twin Cities office submarkets reported declines indirect and sublease vacancy numbers during the second half of 2004,further signaling a broad-based recovery in demand. Only theMinneapolis and St. Paul central business districts reportedyear-end 2004 vacancy rates above 20%. The Northeast officesubmarket reported the lowest vacancy rate at 14%.

"The amount of office sublease space declined more than 10% overthe last year, and office users are beginning to fill excess spacein their current locations," says John McCarthy, vice president ofoffice brokerage at United Properties. McCarthy anticipatescompanies will begin leasing new space for growth. "The increasedactivity level we began to experience this year could translateinto nearly one million sf of absorption in 2005."