Downtown Minneapolis Office Market

Downtown - North Loop - Mill District - Elliot Park - Loring Park
alexschief
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Re: Downtown Minneapolis Office Market

Postby alexschief » March 3rd, 2021, 8:06 am

I guess it's not surprising that coverage of the Great Office Absence focused on downtowns, since that's where the effects (and the reporters) were most concentrated. But it's definitely silly that predictions about the future of offices have focused on downtowns.

Downtown offices are the most productive and well-liked type of office. Isolated suburban office parks are the least productive and least well-liked type of office. If the problems caused by the pandemic had led to companies being short on cash, then downtown offices would suffer. But the problems caused by the pandemic led to all offices being unsafe, while companies continued making money. Looking forward, if you're a big profitable corporation with too much office space, are you going to cut your highly visible flagship offices or your marginal suburban offices?
Also, the downtown/CBD office is much more appealing if you don't have to commute there every day. With telework mitigating the commuting and housing cost pain of downtown, what's the point of an office in Bloomington?

I agree office parks will be hit harder by this long-term.
I mean, maybe. But wouldn't the offsetting argument be that since offices just aren't as important, you'd get as cheap an office as possible? I think if the office isn't particularly to impress employees or visitors (which there will be less of), it's mostly a place to collaborate. And like you say, if you don't have to commute very often, do people really care if they have to commute from Maple Grove to Bloomington vs. Downtown? I think they will be less likely to be knowledgeable about public transit (since they simply don't use it much), and decide to 'just drive'. I gotta believe that to most suburbanites that situation makes Bloomington look far more attractive than downtown.
Suburban offices already competed on price. The reason downtown offices were more expensive than suburban offices is because they offered more than just physical space for workers. If the importance of that physical space declines because employees feel more comfortable working from home, then the office locations that offer only that physical space will lose most of their value, while the office locations that offer more than that physical space (e.g. good spots for lunch, things to do after work, interesting views, a prestigious and visible location, agglomeration, etc.) will gain a relative advantage (even if the office sector shrinks overall).

amiller92
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Re: Downtown Minneapolis Office Market

Postby amiller92 » March 3rd, 2021, 11:39 am



I mean, maybe. But wouldn't the offsetting argument be that since offices just aren't as important, you'd get as cheap an office as possible? I think if the office isn't particularly to impress employees or visitors (which there will be less of), it's mostly a place to collaborate. And like you say, if you don't have to commute very often, do people really care if they have to commute from Maple Grove to Bloomington vs. Downtown? I think they will be less likely to be knowledgeable about public transit (since they simply don't use it much), and decide to 'just drive'. I gotta believe that to most suburbanites that situation makes Bloomington look far more attractive than downtown.
People have arranged their lives to commute to where their office now is. Downtown is the location with the most commuting options. Moving out of downtown necessarily means fewer options and disrupting existing patterns and longer commutes for anyone on the other side of the metro from the move.

xandrex
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Re: Downtown Minneapolis Office Market

Postby xandrex » March 3rd, 2021, 12:41 pm

I'm skeptical of this being a new era of WFH in general (I think a lot of folks in apartments or families with two working parents don't have the necessary space), but I don't see how downtown doesn't lose some clout if there's a drop in demand for office space.

If you commute to your job five days a week, the importance of things around you (coffee shops, lunch spots, errands) would seem to be fairly important - you're going to be spending 40+ hours in that area, so being able to meet needs and wants during working hours has some sway. But if you're going in only twice a week, you suddenly have three other days at home (or wherever you work remotely) to go grab lunch or run that errand - all without a boss necessarily knowing you even left your desk! If your office is downtown, it no longer makes sense to have a MetroPass or pay for monthly parking, so you're suddenly seeing the costs coming right out of your pocket ($10+/week for the bus or whatever the early bird fee is for the ramp). That "free" parking lot outside the non-downtown office probably looks a little more attractive.

Which isn't to say downtown is dead. But it seems like they're going to feel the pinch just like suburban office space would if there's a permanent WFH shift.

One other thing I wonder about is what travel mode share will look like under such a scenario. It seems like if you work downtown, early bird ramp fees can be somewhat comparable to two bus fares (to work and back) but with the convenience of not being on a schedule. Even if cars downtown decreased on the whole, I wonder if single-occupancy vehicle mode share would tick up at all.

alexschief
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Re: Downtown Minneapolis Office Market

Postby alexschief » March 3rd, 2021, 2:55 pm

I'm a bit skeptical that many people will choose a schedule like the one you described (three days in the office, two at home). I think it's more likely that people are fulltime office or fulltime WFH, and there are just more people in the latter category than before and more flexibility overall.

I can speak from personal experience here, because I am finding myself going into the office about 2-3 times a week these days based on the work that I have, and it's extremely inconvenient to schlepp my laptop and associated equipment with me there and back. I also have to make sure that if I have post-it notes or a notebook in one location, that I take them with me. It's a routine I only put up with because I don't expect it to be particularly long-lasting.

dajazz
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Re: Downtown Minneapolis Office Market

Postby dajazz » March 4th, 2021, 9:25 am

I'm a bit skeptical that many people will choose a schedule like the one you described (three days in the office, two at home). I think it's more likely that people are fulltime office or fulltime WFH, and there are just more people in the latter category than before and more flexibility overall.

I can speak from personal experience here, because I am finding myself going into the office about 2-3 times a week these days based on the work that I have, and it's extremely inconvenient to schlepp my laptop and associated equipment with me there and back. I also have to make sure that if I have post-it notes or a notebook in one location, that I take them with me. It's a routine I only put up with because I don't expect it to be particularly long-lasting.
Completely disagree. Our company has already offered a hybrid model for years allowing 3/2 or 4/1 and the vast majority of employees utilize it as it strikes the perfect balance for them. Taking a laptop home isn't that big of a deal, they key it to minimize what else you're bringing back and forth. I ditched paper products so now all my notes are digital, only thing in my bag pre-covid was a laptop and my lunch.

uptownbro
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Re: Downtown Minneapolis Office Market

Postby uptownbro » March 4th, 2021, 9:35 am

I also have to disagree. My company has for the past 4 years has allowed for a hybrid model. Honestly most people were already doing 4 days in the office and 1 day wfh.
As for taking the laptop and a note pad home I dont see that as a big hassle. My follow up question is what kind of equipment do you have to bring to and from the office.

alexschief
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Re: Downtown Minneapolis Office Market

Postby alexschief » March 4th, 2021, 9:57 am

Perhaps I'm wrong about people's schedules. My employer was similarly flexible pre-pandemic, and to my knowledge there were not many people on a true hybrid schedule, they were either fulltime one or fulltime the other, just with the flexibility to work from home or the field on the occasions when they needed to, or hotdesk at the office on the occasion that they needed to.

That said, I'm not arguing that offices in all locations won't take a hit. I just see that blow landing far more heavily on suburban locations in the near term.

xandrex
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Re: Downtown Minneapolis Office Market

Postby xandrex » March 4th, 2021, 10:41 am

I'm a bit skeptical that many people will choose a schedule like the one you described (three days in the office, two at home). I think it's more likely that people are fulltime office or fulltime WFH, and there are just more people in the latter category than before and more flexibility overall.

I can speak from personal experience here, because I am finding myself going into the office about 2-3 times a week these days based on the work that I have, and it's extremely inconvenient to schlepp my laptop and associated equipment with me there and back. I also have to make sure that if I have post-it notes or a notebook in one location, that I take them with me. It's a routine I only put up with because I don't expect it to be particularly long-lasting.
Like I said, I'm skeptical of a major shift to primarily working from home. I was more playing out that if such a shift happened, I just don't see how downtown doesn't take a hit similar to that of suburban office buildings because of the visible costs that employees face (parking/transit fare) that I assume are easier to swallow when they're 1) bundled for the month and 2) not paid directly out of pocket.

As for myself, I'm ready to head back ASAP. I've always worked for places with flexibility, which is something I appreciate, but I like having my work at work -- and all the accompanying sticky notes and other things that keep me informed and on-task.

uptownbro
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Re: Downtown Minneapolis Office Market

Postby uptownbro » March 4th, 2021, 10:48 am

I think you will see both take a hit but I think suburban officers might be hit harder just due to how inflexible it is to travel to and from work. My office in the burbs does have a bus route but its a 60 min ride vs a 15 min drive. If I worked downtown its a 10 min drive or a 15 min bus ride. MY co workers live all over the metro. Most liked the idea of working from downtown more. Now this could have changed in the past 12 months
I was able to work in the office for the second half of 2020 and it was much needed as Its not great imo for anyones mental health to wake up walk out and see work right away but maybe thats apartment living

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Nick
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Re: Downtown Minneapolis Office Market

Postby Nick » March 4th, 2021, 7:34 pm

A lot of the “people love working from home!” stuff feels like kind of a psyop. Do they? Individual people not liking going into their offices may have a lot to do with whether or not they like their current job—not the idea of going to work in general. Most people I know are itching to be back around people regularly.

phop
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Re: Downtown Minneapolis Office Market

Postby phop » March 4th, 2021, 9:45 pm

I don't love it, but I prefer it to working in my office. Suburban cubicle farms can be really oppressive environments to work in. My options for an outdoor break were basically a parking lot or a glorified road frontage. During winter weekdays, the only realistic opportunity to be outside in daylight was my morning walk from the lot to the building. At home, I can walk/bike/bring my laptop to the patio whenever I need a break. Not having to drive to the office all winter was also nice. These seem like pretty fundamental issues with jobs located in the burbs.

billhelm
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Re: Downtown Minneapolis Office Market

Postby billhelm » March 5th, 2021, 2:01 am

I’ve been doing 2/3 or 3/2 days in office/WFH for years. Like anything else you get used to it. I like working at home and have a good setup here, but still appreciate being able to go in and I do miss it.

That said I do think companies are going to decide they need less space. I’m already seeing my company hire more work perm from home and drop leases on smaller sites. The perm remote options open up a lot of markets for National or regional hub based companies to hire out of market talent that they might not have considered before. Dropping leases on smaller offices with inadequate meeting facilities is also a no brainer.

dajazz
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Re: Downtown Minneapolis Office Market

Postby dajazz » March 5th, 2021, 8:39 am

A lot of the “people love working from home!” stuff feels like kind of a psyop. Do they? Individual people not liking going into their offices may have a lot to do with whether or not they like their current job—not the idea of going to work in general. Most people I know are itching to be back around people regularly.
I don't think anyone truly loves working from home, at least anymore than they love working in the office. People love to be treated like adults. Adults who can make their own decisions about what is best for them. A hybrid model gives them that. The days I'd WFH I'd run errands over my lunch, go for a long bike ride around the lakes, start work early and log off early, or sleep in late since I didn't have to worry about a commute. I agree there's a benefit to being in the office and socializing, but are you really going to develop closer bonds if you're working in the building 3 or 4 days versus 5?

I think looking ahead companies are going to need to change what their current offerings are. With so many people having spent a year of their life outside of the office can an organization stay competitive if it doesn't offer any flexibility and requires people to be onsite 5 days a week?

Tcmetro
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Re: Downtown Minneapolis Office Market

Postby Tcmetro » March 5th, 2021, 10:11 am

I am looking forward to going back to the office, mostly because my commute isn't terrible and WFH has taken up some space at home that I'd rather use for other things. It's also just lonely at home in general.

A lot of companies were moving towards reduced office space before the pandemic to save costs, and also because people were WFH some days of the week.

The pandemic has probably sped up the reduced space needs for a lot of companies, but it was something that was going to affect CRE at some point anyways. Some industries (notably finance) really want people in the office at all times, and cybersecurity is a big driver of that.

I'm not sold on the suburban office model, it really only works if your employees live within a reasonable commuting distance of that office. A lot of big companies are adverse to shared space (e.g. WeWork) and pre-pandemic WeWork and other shared space operators had very little interest in the suburbs.

MNdible
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Re: Downtown Minneapolis Office Market

Postby MNdible » March 5th, 2021, 10:18 am

I'm wondering if maybe the cost of providing office space gets overstated? My math on this may be (probably is) terrible, but let's say the average office set up has 200sf/ employee (that's their actual office space plus their share of common space), and then let's say that the office space costs $50/sf for nice office space, including an annualized cost to fit out the space. So that's $10k per year, which certainly isn't nothing, but also, in the overall scope of salaries and benefits for hiring and retaining the best employees, maybe isn't really that much?

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Re: Downtown Minneapolis Office Market

Postby SurlyLHT » March 5th, 2021, 10:23 am

My Two Cents about working from home is that a lot of these businesses employ knowledge or creative workers and their employees working together creates the brand, culture and output they have invested a lot of time and money into creating. If you keep WFH, some of that begins to fade and everyone becomes almost like a contractor disconnected from their colleagues.

Tcmetro
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Re: Downtown Minneapolis Office Market

Postby Tcmetro » March 5th, 2021, 10:43 am

I'm wondering if maybe the cost of providing office space gets overstated? My math on this may be (probably is) terrible, but let's say the average office set up has 200sf/ employee (that's their actual office space plus their share of common space), and then let's say that the office space costs $50/sf for nice office space, including an annualized cost to fit out the space. So that's $10k per year, which certainly isn't nothing, but also, in the overall scope of salaries and benefits for hiring and retaining the best employees, maybe isn't really that much?
RE costs are usually a fraction compared to salary costs, but it's a natural target for cost cutting as it's probably the second biggest expense. There's also tons of different things that can happen while the company is locked into a lease, like mergers, expansion plans, relocations, layoffs, etc which lead to inefficient RE portfolios. If the market is strong it can be easy to get out of some of those leases, but if the market is poor it's basically a sunk cost.

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Re: Downtown Minneapolis Office Market

Postby LakeCharles » March 5th, 2021, 12:24 pm

My Two Cents about working from home is that a lot of these businesses employ knowledge or creative workers and their employees working together creates the brand, culture and output they have invested a lot of time and money into creating. If you keep WFH, some of that begins to fade and everyone becomes almost like a contractor disconnected from their colleagues.
100% agree with this. I think the reason that WFH worked so well during this past year is because companies have built up a culture over time and it carried over to WFH. But if you switch permanently to a more consistent WFH, they will gradually lose that culture until companies become largely interchangeable.

Target seems to have a very desirable workplace and is able to draw talent for that reason. But if they become a remote work company, why would anyone bother? If you are talented, just work remote for Amazon for more pay and a better resume builder.

COLSLAW5
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Re: Downtown Minneapolis Office Market

Postby COLSLAW5 » March 11th, 2021, 10:16 am

And now Target is vacating city center and moving employees to either their north campus, their other HQ building or perma work from home. 3,500 employees

Record Machine
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Re: Downtown Minneapolis Office Market

Postby Record Machine » March 11th, 2021, 10:19 am

oof.


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