The total universe of office space in the downtown Saint Paul Central Business District in 2008 is 17,102,737 sq. ft. This is a decrease of 170,663 sq. ft., or 1% from last year. This represents an increase of more than 2.62 million sq. ft., or 15% over the total universe in 1995.

Since 1998, there has been an unprecedented level of development and new investment in the downtown area that has shaped the remarkable renaissance in Saint Paul. Over $3 billion has been invested into the Central Business District to revitalize the city.

Vacancy
In 2008, the overall office space vacancy rate in downtown Saint Paul for the total universe (competitive office space, government space, and owner-occupied space) is 10.0%, or 1,683,779 sq. ft. This vacancy rate is 1% lower than the overall vacancy reported last year (11%, or 1,897,756 sq. ft.).

Saint Paul’s vacancy rate mirrors the vacancy rates throughout the country. A slightly higher vacancy rate is not surprising considering the economic climate we are experiencing nationwide. Saint Paul’s position appears strong with lower rental rates and significantly lower property taxes continuing to make downtown Saint Paul an attractive and affordable choice.

Over the past 13 years, 9 new office buildings have been built in Saint Paul, representing an investment of $643,200,000 and an addition of 2,766,762 sq. ft. of office space to the downtown office market. While the increased supply of new office space has kept the vacancy rates at higher levels, it has also provided enhanced office space options to market to new tenants.

Comparative Office Vacancy Rates
Minneapolis/Saint Paul’s 2008 downtown office vacancy rate compares favorably with other downtown vacancy rates across the country.

Source: CB Richard Ellis Second Quarter 2008

BOMA Office Market Report >
Learn more about office availability from the Greater Saint Paul Business Owner and Management Association.

Competitive Office Space Analysis
Approximately 50%, or 8.57 million sq. ft., of the Saint Paul Central Business District office space is competitive (multi-tenant space) and is categorized into class A, B and C space.

The competitive office space in the Saint Paul Central Business District consists of 24.9% Class A space, 61.1% Class B space, and 14.0% Class C space. The percentages for Class A space are slightly higher than in 2007, while the amount of Class B and Class C space has decreased slightly.

The reduction in Class C buildings since 1995 reflects a continuing trend of removing underutilized buildings from the office space inventory and repositioning them for a better use. In the past six years, 926,858 sq. ft. of office space has been converted to housing, adding approximately 350 new housing units to the downtown housing inventory.

Absorption
Vacancy should be viewed within the context of the absorption of the market. Absorption is a measurement (net increase or decrease) of office space occupied during a specific period. Total net office space absorption in downtown Saint Paul in 2008 was 63,814 sq. ft. If absorption is tracked for competitive office space alone, downtown Saint Paul absorbed of 59,748 sq. ft.

The Saint Paul Central Business District has absorbed a positive net total of 1,851,201 sq. ft. of office space since 1995. This represents an annual average absorption of approximately 142,400 sq. ft.

Market Rental Rates
The gross rental rate for office space is the sum of the net rental rate and the operating expenses, including property taxes. A number of factors influence the actual rental rate in a lease transaction, including location in the building, tenant improvements, parking, lease term, credit worthiness, services, and more.

Downtown Saint Paul office market rental rates have stayed competitive. Overall, the median gross rental rates for all three classes of competitive space have declined slightly to an average of $10.19 per square foot versus $10.56 per square foot last year.

Property Values
Downtown Saint Paul property values were hit hard by the real estate recession that struck urban centers across the nation in the late eighties and early nineties. Assessed values of downtown commercial office space decreased by over 50% from 1989 to 1994 and downtown property values flattened out from 1994 to 1996. With the creation of Capital City Partnership, and aggressive leasing activity, downtown building values appreciated by more than 140% from 1996 to 2007.

The rapidly appreciating property values leveled out, and are on the rise again, as illustrated by the graph showing the over 25- year history of downtown commercial/office property values in Saint Paul below.

Downtown Estimated Commercial Industrial Property Values