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Originally Posted by The North One
Minneapolis has some of the highest if not highest downtown office vacancy rates in the Midwest so a new office tower makes no sense, especially not now. They're likely going to sit on it for a long time and collect parking revenue.
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I don't know about elsewhere, but yes, our office vacancy is pretty high right now.
It's entirely possible that Hines is playing the long game-- maybe Hines saw an opportunity to buy what is probably the singular most eligible property for office development in the entire state at a discount given the current market, and plan to hang on to it for 5, 10, 15 years.
The other possibility is that they either have a marquee anchor tenant locked in, or are preparing the whole project with the intent of marketing to a particular anchor tenant.
I would note that this site is less than a block from Target's main cluster of offices, and that Target's leased space at City Center (900k sqft) a few blocks away ends in December 2023 (they do have options beyond this, however). Target has also been kicking ass lately.
There are other major players that could be interested as well. A lot of the vacant space in Minneapolis is in smaller chunks, rather than big contiguous segments that could be occupied by a large user. Much of the space might also not be very appealing to certain users. The Dayton's Project comes to mind as a ton of space that is probably not very appealing to a law firm or investment bank. There are some other things going on locally that could motivate some big moves-- US Bank has been pushing for more space both at US Bank Plaza and US Bankcorp Center, displacing other users. RBC relocating to their marquee new building could motivate some who compete for talent with them to seek a higher-end space as well. We also still don't really know all of the long-term impacts of COVID on the office market. Will there be some employers who really want their employees to be physically in the office and who will be willing and able to pay for more space per employee to make sure they can always do that? Or to just be in a new building whose HVAC was designed in the COVID era?
For one reason or another, Hines is exploring a large office project here. And that's something to be hopeful and excited about.