Two-plus years of work-from-home? That leads to sluggish office markets – REJournals - REjournals.com

Summary

What happens when office workers are told to work from home for more than two years? It becomes awfully difficult to bring them back to the cubicles, conference rooms and desks of the office world.

And that has led to an office market that remains in a limbo state, with many companies still debating their return-to-the-office plans.

What happens when office workers are told to work from home for more than two years? It becomes awfully difficult to bring them back to the cubicles, conference rooms and desks of the office world.

And that has led to an office market that remains in a limbo state, with many companies still debating their return-to-the-office plans.

For a good example of the impact that COVID’s work-from-home policies have had, just look at the first quarter 2022 Minneapolis-St. Paul office market report released by Cushman & Wakefield. According to this report, the vacancy rate in the Minneapolis-St. Paul office market had soared to 24.7% as of the end of the first quarter of the year. And during the first quarter, the market saw negative absorption of 496,000 square feet.

And the Twin Cities market is not unlike other office markets across the Midwest, all of which are struggling with higher vacancies and negative net absorption.

Cushman & Wakefield said that three vacant sublease blocks larger than 50,000 square feet hit the Minneapolis-St. Paul market in the first quarter of this year. That contributed to the negative absorption total here.

In the St. Paul CBD, the second- and third-floor sublessor at 10 River Park Plaza vacated space totaling 84,847 square feet. Also during the quarter, Be The Match listed the top two floors, totaling 70,250 square feet, at what was previously a single-tenant facility in the Minneapolis CBD. And Pearson vacated 64,302 square feet at Norman Pointe in Minneapolis’ Southwest submarket.

Is there any positive news for the Twin Cities’ office market? Cushman & Wakefield pointed to the RBC Gateway office project in the Minneapolis CBD. Construction wrapped on the 531,000-square-foot project in the first quarter. The building’s anchor tenant, RBC Wealth Management, was the only move-in during the quarter. But the project was more than 95% leased upon delivery.

There were also some big office sales during the first quarter. Cushman & Wakefield pointed to Excelsior Crossings selling for $82.5 million. The 508,000-square-foot two-building portfolio was more than 90% leased at the time of closing.

Value-add deals have also provided a boost to the Twin Cities office market. In the Minneapolis CBD, The Andrus at 520 Nicollet Mall sold to a private buyer for $23 million in the first quarter.