MINNEAPOLIS (FOX 9) - Experts in the commercial real estate market are concerned over what the future may hold for offices and businesses in downtown Minneapolis.
Last week Target announced it was suspending its City Center operations when its lease expires, and now the Angel Food Bakery in downtown has announced it will be moving to St. Louis Park.
"We’re seeing a lot of activity from the downtown market interested in properties around the 394 corridor because they are interested in better safety... I mean it’s real. It’s very concerning," said Laura Moore, vice president of office brokerage services at Colliers.
In the commercial real estate market in the first quarter to date of 2021, the Twin Cities has seen 1.5 million square feet what experts call "negative absorption." Negative absorption refers to office space that will be absorbed back into the market because tenants do not intend to renew leases.
Target accounts for 1 million of that square footage. It is a large footprint that Moore says could drive more vacancies in the future.
"It’s kind of a bigger picture because it’s not just the office tenants. There are a lot of other businesses that choose to be downtown because of Target, so I have a big concern that other vacancies are going to drop and change because of this announcement," Moore said.
Experts say safety is the number one priority for those leasing office space in downtown, and in order to help mitigate the problem city officials need to face address it head on.
"It’s addressing what Minneapolis is doing for the volatility that is happening in the community. I know it’s not going to be solved overnight, but the worst thing that could happen is not addressing it. I feel like it hasn’t been addressed. It’s been a topic that people are uncomfortable talking about because it's calling it for what it is and it’s a problem," said Moore.
Right now, occupancy in office buildings is at roughly 15% to 17%, and while Moore believes an increase in vaccinations will help bring people back, many are re-evaluating their needs for space.
There is currently 2.4 million square feet of new real estate under construction in Minneapolis.