Downtown Minneapolis office space sells for just $10.25 per square foot

Last week, the Minneapolis/St. Paul Business Journal reported:

Two downtown Minneapolis office towers have sold in a deal representing one of the core’s steepest discounts in recent history.

The 634,000-square-foot Forum buildings, previously known as International Centre and Oracle Centre, sold last week for $6.5 million, according to a real estate filing with the Minnesota Department of Revenue published Monday afternoon.

The price is about 91% lower than the property’s last sale, at $73.7 million in 2019.

Neither is this a one off:

Some of the other major discounts of office buildings in and around the CBD have included the Kickernick Building and LaSalle Plaza, which sold 80% and 70%, respectively, below their last purchase prices.

As I’ve written recently, this poses a major problem for the city council.

As commercial property prices tank so, too, do their values assessed for property tax purposes. The Business Journal reports that “Combined, the towers have an assessed value of about $30 million, according to Hennepin County property records” and notes that “The sale has the potential to set a new benchmark in downtown Minneapolis’ office landscape, which already has been facing volatile market conditions, such as tenant downsizing, heightened interest rates, loan maturities and falling values.”

And, as assessed commercial property prices are dragged down so, too, are commercial property tax revenues. This is hammering city budgets and pushing leaders to hike residential property taxes to fill the hole.

The collapse of downtown Minneapolis risks bringing the city’s finances down with it.