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Report: 40 percent of downtown St. Paul’s competitive office market is up for sale

In downtown St. Paul, mid-grade and low-rent office spaces have experienced a hefty uptick in vacancies, and even prime “Class A” office space saw a nominal increase in vacant room for lease in the past year.

That’s partly because about 40% of downtown’s competitive office market has been listed for sale, spanning a combined 3 million square feet, and sale offerings have peeled back the curtain on many longstanding vacancies in mid-range buildings, increasing the official tally.

Overall, nearly a third of the competitive, non-owner occupied office space in and around downtown sits empty.

Those findings are according to the Greater St. Paul Building Owners and Managers Association, which recently released its annual St. Paul office space market report. This is the 30th annual edition of the report, which takes a deep dive through 14 million square feet of office buildings, vacancies, sales, and government and owner-occupied spaces to analyze the state of the downtown office market.

Report findings

The central business district described in the 14-page report goes beyond downtown proper, ranging in boundary from the Minnesota Transportation Museum on Pennsylvania Avenue down to the Wabasha Street Caves, and from the edges of Cathedral Hill to east of the St. Paul Farmers’ Market.

Among the market report findings:

• The overall office occupancy rate in the business district slipped from 2023, dropping from 90% occupancy to 85%.

• Competitive, non-owner occupied office space increased from 22% vacancy in 2023 to 32% vacancy. That’s up from just over 20% vacancy a decade ago.

• All classes of office space saw vacancies increase, with Class B seeing the greatest increase (about 16 percentage points) to almost 43% vacancy.

Vacancies

Madison Equities put 10 commercial buildings on the market together this April, and sale offerings have revealed greater-than-expected vacancies in those and other Class B properties, primarily in the Alliance Bank Center, First National Bank Building, Golden Rule Building, Great Northern and US Bank Center.

“Each of these buildings had over 100,000 square feet of increased vacancy over what was reported previously,” reads the report.

Vacancy within Class C office space that commands below-average rents increased 8 points to 21%, and vacancy within Class A space increased 1.2 points to about 20%.

The central business district described in the report shrunk by 450,000 square feet of office space due to the ongoing conversion of Landmark Towers into residential units, the demolition of the Ford Building on University Avenue, and other changes impacting the Degree of Honor Building, the Hamm Building and the former Lowry Hotel Building.

An American Red Cross property on the West Side of St. Paul was reclassified in the BOMA report from owner-occupied office space to “healthcare,” a new category for the study that moving forward will add some four million square feet to the 14 million square feet of office space already chronicled in the report.

More information is online under “resources” at bomastpaul.org.