Positive future means solid present for Saint Paul office market

The U.S. Bank Center in downtown Saint Paul saw its occupancy jump during the year.

The U.S. Bank Center in downtown Saint Paul saw its occupancy jump during the year.

by Dan Rafter

The Web site of the future Lowertown Ballpark in the Lowertown neighborhood of Saint Paul, Minn., features a countdown clock ticking down the time remaining before the park’s first opening day. As of mid-October, more than one year and seven months remained before the Saint Paul Saints minor-league baseball team would take to the brand-new field that is now under construction.

But that long wait hasn’t diminished the excitement surrounding the ballpark, excitement that has spilled over into the entire Saint Paul region. This buzz has been a positive for the St. Paul office market. Businesses recognize that Saint Paul is at the beginning stages of a growth spurt. And the ballpark project is the most visible evidence for this.

“There is a lot of anticipation of what is going to take place in this market,” said Joe Spartz, president of the Saint Paul Building Owners & Managers Association. “There is a positive vibe in the Lowertown neighborhood. People recognize this as a place that is certainly attracting individuals, and not just Millennials. It’s attracting people from all demographics. Businesses are interested in that area. It’s a robust area.”

Spartz says that the entire downtown Saint Paul area is one that people want to be at. And they don’t want to work there all day and head home at 5 p.m. They want to stay there all day and all night.

And this has been a positive for the downtown office market. Businesses are more likely to locate in the downtown Central Business District if they know that their employees want to be there, Spartz said.

The Building Owners & Managers Association recently released its 2013 Saint Paul Office Market Report. The report provides plenty of statistical evidence that Spartz’s optimism about the region’s office market isn’t misplaced.

First, the report shows that the office occupancy rate for the Saint Paul Central Business District remains steady at 90 percent for the third consecutive year for competitive, government and owner-occupied space.

In the competitive-space sector, the report shows a Class-A occupancy rate of 87.3 percent, a jump from 86.8 percent one year earlier. The Class-B occupancy rate increased from 75.7 percent to 77 percent, while the Class-C rate showed the biggest increase, jumping from 80.4 percent to 86.9 percent.

“You are seeing some individual businesses and organizations choosing to make a commitment to the downtown Saint Paul area,” Spartz said. “They are relocating here and they are expanding here. Overall there is a feeling that Saint Paul has a positive future.”

Certain Saint Paul office buildings saw greater occupancy increases than others. For instance, the U.S. Bank Center saw its occupancy increased by 30,354 square feet, while 81 on Seventh saw an occupancy boost during the year of 20,396 square feet.

108 East 5th Street’s occupancy jumped by 14,644 square feet and Kellogg Square’s increased by 14,126.

Other buildings, though, saw significant vacancy increases. According to the report, vacancy increased by 8,650 square feet at Capitol Professional Office Building and 7,562 square feet at the 400 Building.

The association’s report also provides an interesting look at the makeup of the Central Business District’s office space. According to the report, 49 percent of the office market is made up of competitive space, 32 percent government space and 19 percent owner-occupied space.

Class-A space represents 26.04 percent of the competitive office sector, while Class-B represents 65.33 percent and Class-C 8.64 percent.

The office report didn’t contain only good news for Saint Paul landlords and owners. It did show that rental rates in Central Business District offices were either flat or falling. According to the report, the quoted median rental rate for Class-A space fell to $24.28 a square feet, down 15 cents a square foot from 2012. Class-B space median rental rates fell to $17.23 a square foot, down 94 cents a square foot. Class-C rental rates have remained flat at $15 a square foot since 2007.

Spartz, though, characterized the report as a positive one, one that shows that Saint Paul has survived the worst days of the Great Recession and the slow recovery from them. The city is now ready for more growth, he said, something that should make for even more positive office reports in the future.

“A big piece of this has to do with the skills, talents and education of our employee base,” Spartz said. “The education level here, the skill level is something that helps drive an ongoing base of employment. It is very attractive to employers who want to relocate or expand here. When you have th mix of businesses that are here and that fundamental baseline of talent, it gives us a very good opportunity to be successful.”

This entry was posted in Minneapolis commercial real estate, Minnesota real estate, office, St. Paul commercial real estate and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s