Rokos Market Reports

The Twin Cities healthcare real estate market strengthen through 2025, outperforming traditional office amid resilient demand for outpatient and medical services. Tightening vacancy and limited new supply continue to support healthcare real estate as a stable asset class across the region.

The Twin Cities industrial market remained extremely tight in Q4 2025, with vacancy holding near 4.2% and development activity remaining disciplined. Demand continues to favor modern logistics and manufacturing space, while older and flex product experiences softer conditions amid normalized tenant demand.

The Twin Cities office market entered a stabilization phase in Q4 2025, with vacancy holding at 27.9% and full-year absorption turning positive for the first time since 2019. Leasing remains selective a tenants favor higher-quality space, while limited new construction continues to support market fundamentals.

Despite rising costs and selective development, the Twin Cities industrial market stays resilient—driven by a 4% vacancy rate, over 1.15 million SF of new speculative space delivered year-to-date, and ogoing demand for Class A product.

The Twin Cities office market is showing early signs of recovery, with vacancy improving to 27.9% and over 1.2 million SF of new leasing activity this quarter. Class A assets continue to outperform as tenants gravitate toward quality, upgraded space while overall rents hold steady near $31 per SF.

Industrial fundamentals remain strong across the Twin Cities. Vacancy rates hold at approximately 4%, keeping the market among the tightest nationwide. Demand continues to shift toward new, high-quality product, while older buildings face rising vacancy.

The Minneapolis—St. Paul office market is showing early signs of stabilization. Vacancy dipped slightly to 28.9%, with Class A and renovated Class B properties outperforming the broader market. The Twin Cities leasing market is down approximately 15% year-over-year.

Rent escalations have been a critical talking point in negotiations. Asking rates have increased by over 30% year-over-year. Tenants are struggling to renew their leases at favorable terms due to the new, higher market rates.

Major metro-based companies have dropped large amounts of office space from their corporate campuses, increasing the metro’s available corporate campus space availability to 18.45 million SF. The Twin Cities office market continues to struggle to return to pre-pandemic leasing levels.

Industrial rental rates are increasing which has been largely driven by low vacancy rates and a reduced construction pipeline, which fell by over 70% from last year. Leasing is expected to increase in key submarkets like the Northwest due to new construction demand.

Reduced office space needs and the shift to hybrid work has continued to contribute to high vacancy rate. However, rental rates are holding steady. MSP has a 22.1% vacancy rate, with annual rent increases outperforming the U.S. average at 2.8%. Leases over 100k SF continue to decline.

The Twin Cities healthcare real estate market is experiencing steady growth in 2024, mirroring the moderate expansion of the overall healthcare sector. Adapting to evolving trends like outpatient care, telehealth integration, and patient experience will be crucial for success.

In 2023, Minneapolis’s industrial market saw high absorption and leasing activity, with 5.15M square feet absorbed and 15.4M square feet transacted, respectively. Construction remained active, delivering 8.6M square feet, but outpaced absorption, leading to increased vacancy rates.

Shifts in office space utilization and hybrid work led to negative annual net absorption for the fourth consecutive year. This resulted in an all-time high vacancy rate of 21.1%. Twin Cities office market continues to struggle to return to pre-pandemic leasing levels. 2023 leasing volume approximately 20% below the five-year pre-pandemic average.

The second quarter of 2023 showed the strongest leasing activity in nearly two years. With almost 4.5M square feet leased, activity is up more than 20% year-over-year. Still, the market is shifting.

Companies are continuing to right-size– downsizing and consolidating their office space. While this is driving negative absorption in the market, leasing activity is up nearly 40% year over year.

Vacancy continues to inch upward as more companies cement their hybrid or remote work policies and stray from outdated Class B and C properties. Amenity-rich Class A space continues to demand high, rising rates.

Industrial rates are rising despite a dip in new construction. Demand for functional properties in strong labor markets is most prevelant. Despite this demand, much of which is new construction, the construction pipeline has slowed.

Fears of an upcoming recession triggered by inflation, rising labor and construction costs, and rising interest rates have led some to take pause; however, for most businesses, the demand for industrial space continues unhampered.

Office occupancy rose in Q3 as employees returned to the office after Labor Day, although at a slower-than-anticipated rate. Amenity-rich, high-quality office space continues to attract companies looking to lure workers back to the office.

With the onset of the pandemic and the subsequent surge in e-commerce, the industrial market has gone from basic to booming. The first quarter of 2022 solidified that industrial is still hot with few signs of slowing. The unprecedented demand has pushed vacancy to a historic national low.

Major Twin Cities employers, like Xcel Energy and Wells Fargo, officially asked their employees to come back to work. Simultaneously, the office market gained momentum as companies with expiring leases began signing new leases (although typically at a 15-20% smaller footprint).

Leasing activity continues to slowly climb upward as active tenants focus in on high-quality office space. This flight-to-quality trend sees tenants seeking space in newly built or renovated buildings to help influence their employees to come back to the office.

After four quarters of negative absorption, the third quarter of 2021 finally saw a dip in vacancy with positive absorption largely due to new tenants in the Minneapolis CBD. Leasing regained strength with suburban markets having a major impact on market recovery.

The healthcare real estate market has remained strong in the Twin Cities with outlook moving forward looking positive. Healthcare has once again shown that it is one of the more resilient asset classes in the commercial real estate market.