Minnesota is one of the most prosperous Midwestern states and is known for having a diversified economic base. The state is home to a thriving service economy and many large corporations are headquartered here, including Cargill, Target, 3M, and US Bank. Minnesota has the highest number of Fortune 500 companies per capita, and the local commercial real estate market has been growing up to five times faster than markets in larger cities, like Chicago or Boston. A competitive economy and a skilled workforce make Minnesota a very attractive destination for tenants, landlords, and investors.

Office Market

Saint Paul and Minneapolis are home to a large percentage of the state's office floor space. This area is also known as the Twin Cities office market, which is further subdivided into three key areas: the CBD, the I-494 corridor, and the I-394 corridor. This market is characterized by a strong presence of companies in the public sector, professional and business services, manufacturing, and healthcare.

A 2015 Colliers International report on the CBD office market in Minneapolis showed that absorption levels were down for Class A space but up for Class B properties. Rental rates have increased by up to 20 per cent in areas like Nicolett Mall and the North Loop. At the end of Q1 2015, there were 3.8 million square feet available in the Minneapolis CBD area, which translates into an average vacancy rate of 14 per cent (12.6 per cent for Class A space and 17.8 per cent for Class B space). Most of the space available belongs to office properties in the US Bank Plaza area, the IDS Center, South Sixth, and South Fifth Street. Asking rents have increased moderately across all office sub-markets, and currently average $17.25 / sq ft, $13.64, and $11.30 for class A, B, and C office space.

Increasing demand has been the predominant theme for properties in the 494 Corridor. Here, vacancy rates have decreased significantly, mostly in the office parks around Centennial Lake and Normandale Lake. There are just over 2.5 million square feet available in this area, where average vacancy rates are 15.5 per cent. Direct asking rates for Class A space average $15.24 / sq ft, dropping to $13.64 and $11.30 for class B and C respectively.

As for properties along the 394 Corridor, market analysts report increased activity levels in areas like Plymouth and Brooklyn Park, as important companies in the medical, educational, and energy sectors have moved into the area. Rental values for Class A offices are also up by 6.5 per cent, although the West End has seen prices hikes of up to 20 per cent. Asking rates for prime properties can reach $22 / square foot, although average values of $16.6 are commonplace.

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Retail Market

The most notable trends in the retail real estate market include a peak in average asking rates, low vacancy values, and increased absorption levels. Current vacancy rates for retail properties in Minneapolis – St Paul average 4.8 per cent and are at their lowest value since 2010. Vacancy levels are at their lowest in Ridgedale, Woodbury, and Southdale, whereas areas like Maplewood, South Robert, and Northtown have above-average availability. The most recent market statistics published by Colliers International point at outlet malls and regional centers as being the most sought-after retail real estate types.

Bloomington has been gaining importance as a retail hub, and demand for large retail space has grown accordingly. Demand is particularly high for restaurant space and among insurance companies looking to set up walk-in customer service centers in the area. Other important tenants are involved in the medical-related retail and hospitality sectors. Retail real estate prices in the Twin Cities market have increased in line with the forecasts and now average $27.55 / square foot.

Incentives and Programs

The state of Minnesota offers a range of financial incentives and support programs aimed to help small and medium-sized businesses get established in the local real estate market. Federal assistance is also available. Some of the most notable incentive schemes include the following:

- The Minnesota Investment Fund offers financial support to companies looking to acquire real estate, and specifically to firms in the technology and manufacturing sectors
- The Border Cities Enterprise Zone Program offers a range of financial incentives (including real estate tax credits) to certain businesses in areas like Moorhead, Dilworth, Breckenridge, and East Grand Forks
- Research and development tax credits are available to qualifying Minnesota-based businesses
- The New Markets Tax Credit Program provides assistance to eligible businesses looking to acquire real estate in designated communities
- In Minneapolis, Tax Increment Financing is available to support the redevelopment of certain commercial properties