Local boosters often tout that the Twin Cities ranks high on many lifestyle surveys.
But the metro area ranks nowhere near the top in a new survey from Chicago-based Jones Lang LaSalle, a commercial real estate services firm, which tallies the “most expensive streets” across the United States based on the cost of leasing office space. Nicollet Mall in downtown Minneapolis ranked as the 25th-most expensive street in America in 2013, according to Jones Lang LaSalle.
The most expensive street in the country is Sand Hill Road in Menlo Park, California. The gross rent per square foot along Sand Hill Road, an area known as the home of many venture capital companies, is $110.76 per square foot. Fifth Avenue in New York City ranks as the second-most expensive with an average rate of $102.02 per square foot.
Both high-priced avenues are more than three times as expensive as the priciest rents along Nicollet Mall in Minneapolis, which averages a gross rental rate of $30.60 per square foot, according to Jones Lang LaSalle.
The Jones Lang LaSalle survey noted: “Midwestern markets remain the most affordable.”
The numbers are based on asking rents, which might differ from the actual rent received, as of the second quarter of 2013. Gross rent per square foot includes the net rental rate, plus operating costs and taxes.
Abel Balwierz, a senior research analyst with Jones Lang LaSalle, said that Nicollet Mall is home to some high-profile trophy office properties. But another key factor is the corporate headquarters of retailer Target Corporation at the south end of the Nicollet Mall. Balwierz said that Target likes to have vendors located within just a few minutes walking distance from its corporate offices.
“Target vendors are the main type of tenant that’s interested in space along Nicollet Mall,” Balwierz said, noting that other tenants include law firms and financial services groups.
“Target, I think, has a big influence on the downtown market,” said Jim Vos, a principal with Cresa Minneapolis, a tenant representation firm.
The top-tier office space in downtown Minneapolis is performing better than the overall market, which remains a mixed bag.
A mid-year survey from Bloomington-based commercial real estate services firm Cushman & Wakefield/NorthMarq found the Class A office vacancy rate was 10.7 percent in downtown Minneapolis at the end of the second quarter, the lowest office rate for any class of office space across the metro. At the same time, Cushman & Wakefield/NorthMarq reported that the overall office vacancy rate across the Twin Cities remained high at 17.5 percent.