From rising rates to shifting spaces, the Twin Cities market is evolving fast—are you ready for what’s next?

The Twin Cities market has weathered a few turbulent years—rising interest rates, shifting demand for office space, and continued strength in industrial and multifamily. As we look ahead to 2026, investors and tenants alike are asking: Where is the market heading, and how can we prepare now?

Here's what to expect in the coming year.

A Market in Transition

The Minneapolis–St. Paul region has always shown resilience, but 2026 is shaping up to be a defining year. 

• Interest Rates: Stabilizing rates could reopen the door for deals that stalled in 2023-2024. 

• Leasing Activity: After a slow recovery, kep submarkets are starting to show signs of renewed absorption.

• Tenant shifts: From flexible workspaces to sustainability demands, tenant priorities are reshaping how space is used. 

The bottom line: 2026 won’t look like the boom years of the past decade—but there will be a major opportunity for those who are positioned correctly. 

Submarkets to Watch

Not all parts of the metro are moving at the same pace. Some areas are emerging as clear frontrunners:

• Downtown Minneapolis: Office space remains challenged, but adaptive reuse projects and entertainment-driven development are breathing life back into key areas. 

• St. Paul Core: A steadier performer, St. Paul continues to attract institutional tenants and mixed-use development interest. 

• Northeast Minneapolis: Growth in mixed-use and small-scale commercial has made it one of the city’s hottest investment spots. 

• First-Ring Suburbs: From Edina to St. Louis Park, investors are eyeing suburban office and industrial flex space for stability. 

For investors, the message is clear: knowing your submarket is more important than ever. 

Investment Opportunities on the Horizon

Even in a cautious market, opportunity exists. In 2026, the strongest plays are expected to be: 

• Industrial & Logistics: Demand for warehouse and distribution space remains steady, fueled by e-commerce. 

• Value-Add Office & Retail: Properties needing upgrades can attract tenants if repositioned correctly. 

• Transit-Oriented Development: With new transit investments rolling out, projects near stations are primed for growth. 

Those who stay proactive will be positioned to capture upside as demand shifts.

Risks and Headwinds

Of course, 2026 won’t be without challenges: 

• Vacancy rates remain a concern in downtown offices. 

• Construction costs and labor availability continue to pressure development timelines. 

• Tenants are more selective, with flexibility playing a bigger role in leasing decisions. 

For both landlords and investors, managing risk will be just as important as chasing returns. 

Preparing for 2026 and Beyond

The Twin Cities commercial real estate market in 2026 is best described as selective but rewarding. The right asset in the right submarket will perform, while underprepared owners may have some struggles. 

Whether you’re considering a new acquisition, evaluating your portfolio, or planning to lease, now is the time to position yourself for what’s next. 

📩 Looking ahead to 2026? Let's talk about how to make your strategy work in today’s evolving market.

Scott Naasz

Chief Executive Officer | Broker | Owner
North Star Commercial Real Estate Advisors | eXp Commercial