MSP’s office market could see 260 bps reduction in vacancy following office to residential conversions identified in St. Paul’s downtown

In response to a slow visitation recovery within downtown areas, coupled with an underperforming office market, the St. Paul Downtown Alliance and architecture firm Gensler have identified 20 properties as candidates for conversion in a separate report, with a substantial number of these properties analyzed as potentially suitable.
Existing office inventory tracked by Avison Young would deplete by nearly 3.5 msf (due to proposed conversions being fully vacant), dropping from 112.9 msf to 109.4 msf. This reduction of high vacancy inventory will have a significant impact on vacancy rates market wide.
In Gensler’s office to residential conversion analysis, 9 office properties were noted as good candidates for successful conversions, resulting in a sharp increase of residential units in St. Paul’s downtown. As mentioned previously, this initiative will significantly impact the area, as it would remove approximately 3.5 msf of vacant office space and reduce the market vacancy rate from 17.7% to 15.1%, a 260 basis points (bps) decline.
Four other office properties were identified by Gensler as less-suitable for conversion, but with potential to succeed with compromises and further study. If these properties were also destined for conversion, market inventory would decline by a total of nearly 3.8 msf, resulting in a 280 bps reduction of total vacancy market wide.

March 4, 2025

US-MN-MSP Minneapolis