Downtown St. Paul office vacancy rises

Downtown St. Paul offices face higher vacancies, according to an annual market report by the Greater St. Paul Building Owners and Managers Association.

The occupancy rate for competitive office space dropped in 2017 to 79.2 percent from 83.4 percent the year before.

"[Class] B is really the key piece," said Joe Spartz, president of the association.

Spartz said there are a couple of Class B buildings that have well above 25 to 30 percent vacancy, a high rate for any building.

In downtown Minneapolis, many of the Class B space is being renovated with the amenities of Class A buildings.

St. Paul has struggled with high vacancy in its multitenant office buildings for years. In 2006, nearly a quarter of the multitenant office space in downtown was vacant. Numbers have improved but this year's vacancy rate of 20.8 percent is a setback.

Downtown St. Paul's biggest loss this year was when Cray Inc. moved hundreds of employees to Bloomington.

There are several buildings in St. Paul that are being improved, but they haven't yet positively impacted the city's numbers. The Osborn370 building, that used to be the former offices of Ecolab, is now included in the mix of competitive buildings since it now has multiple tenants as opposed to a sole occupier. While the building is in the process of a massive renovation and repositioning, its vacancy is still high which negatively impacts the occupancy rate.

The new Treasure Island Center, which has already had some tenants move into it, wasn't counted since the building wasn't complete at the time the report was compiled.

"Downtown will continue to be in this transition mode," Spartz said.

In positive news, downtown St. Paul continues to grow as a residential market. The report pointed to a Maxfield Research, Inc. study that showed that the number of people who lived in downtown St. Paul has grown from 4,862 in 2010 to 8,943 in August 2017.