Office Rents in Downtown Minneapolis and Other Major Markets

By: Chris Stockness

In September 2013, Jones Lang LaSalle released a report on the most expensive streets for office space. Sand Hill Road, in Menlo Park, California, took top honors with an average full service rental rate of $110.76/sf. Nicollet Mall in Minneapolis, Minnesota, was 25th on the list, with an average full service rent of $36.60/sf. Of interest: Nicollet Mall moved up four spots from its 2011 ranking of 29th ($29.27/sf.). In terms of the Midwest, Minneapolis ranked 2nd to Chicago’s Wacker Drive, which was 20th on the list with an average full service rent of $36.62/sf. Detroit came in right behind Minneapolis at 26th ($30.00/sf.). Milwaukee’s Wisconsin Avenue ranked 29th ($28.90/sf.) and St. Louis’s Forsythe Boulevard at 30th ($28.06-sf.). America’s top 10 most expensive streets are all in coastal states.

While other markets have seen a range of highs and lows over the years, office rents in the Twin Cities Market and the Minneapolis Central Business District (CBD) have not appreciated significantly in the past thirty-five years. This is due mainly to the availability of development opportunities in nearby first ring suburbs. Because of easy access to major roadways, such as the Interstate 494/694 loop and Interstate 35, supply keeps up with and often outpaces demand. The Minneapolis CBD has experienced major development cycles every 10 to 15 years with the last cycle occurring around the year 2000 and the previous cycle taking place in the late 1980s. During these cycles rental rates waxed, then waned, as more space was placed on the market. As a result, rents have not changed much overall. In contrast, most of the markets at the top of the list are on the east or west coast: locations in areas that are more densely developed, with limited options for new development. Characteristics of the10 most expensive U.S. streets for office space include the following:

1. Sand Hill Road, Menlo Park, California: $111.00/sf. (-2.5%)
   Historically the most expensive area in Silicon Valley, Sand Hill Road has deep roots with the venture capital community and houses the top VC firms in the greater Bay Area.
2. Fifth Avenue, Midtown Manhattan, NYC: $102.00/sf. (+5.0)
   Consistently ranked among the most expensive shopping streets in the world, Fifth Avenue is also home to numerous hedge funds looking for top-quality space in Midtown and willing to pay more for those coveted office locations with their unparalleled amenities.
3. University Avenue, Silicon Valley, Calif.: $95.00/sf. (+14.1%)
   Located in Downtown Palo Alto, University Avenue is known for its vibrant startup community, as its proximity to Stanford University makes it an ideal location for recruiting top young talent.
4. Greenwich Avenue, Greenwich, Conn.: $93.00/sf. (+3.4%)
   Greenwich Avenue competes with the best commercial real estate, leveraging its rich history preserved through older buildings. Top-shelf retail establishments dot the historically-rich corridor, from the top of the avenue down to the transit center. Hedge fund and financial services firms occupy the majority of office space, with many top executives only steps from their homes. Premier office buildings offer close proximity to train, and command rents as high as $100/sf.
5. Pennsylvania Avenue, Washington, DC: $76.00/sf. (-5.5%) 
   Despite slower overall market conditions in recent quarters, Pennsylvania Avenue has continued to experience rent premiums. Known as “America’s Main Street,” Pennsylvania Avenue is home to many firms desiring close proximity to Washington’s two main points of power, the White House to the west and the Capitol to the east. Some of the increased growth in tenant demand in recent years has stemmed from the government affairs sector of corporate America.
6. California Street, San Francisco: $62.10/sf. (+43.9%)
   The main street of the city’s North Financial District, California Street, is known for its historic cable car routes. It is a wide street with high-priced real estate. Growth in technology and associated industries, along with limited new supply, has pushed rents up by almost half over the past two years.
7. Boylston Street, Boston: $60.20/sf. (+14.3%)
   Boylston Street runs through two of Boston’s most prestigious areas, Back Bay and the Financial District. It is home to numerous landmarks, trophy office buildings, and high-end retail, as well as some of the city’s most distinctive skyscrapers.
8. Avenue of the Stars, Los Angeles: $60.12/sf. (+1.9%)
   The main thoroughfare in highly-desirable Century City market, Avenue of the Stars is home to many prominent legal and financial service firms and talent firms, as well as the largest cluster of Class A Trophy assets on the Westside.
9. Royal Palm Way, West Palm Beach: $58.52/sf. (+0.9%)
   Royal Palm Way is dubbed “Banker’s Row” due to the concentration of wealth management and financial services firms, catering to wealthy residents on Palm Beach Island.
10. Newport Center Drive, Orange County: $50.06 p.sf. (+4.3%)
    Sitting on a bluff overlooking the Pacific Ocean, Newport Center Drive is a 1.3-mile ring that encompasses the Fashion Island retail center. World-class dining and retail amenities along with ocean view suites and access to posh residential neighborhoods make Newport Center Drive one of the most premiere places to rent office space in Southern California.