Office tower value free fall continues
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Downtown office values continued their plunge in 2025, and there's still no bottom in sight for the market.
Why it matters: If you're a homeowner, this means office landlords are paying less in property taxes, and you're covering the difference.
State of play: Downtown Minneapolis commercial real estate values fell 13.7% last year, according to a new report by the Minneapolis assessor.
- This is the fifth straight year of declines. Downtown commercial real estate has now lost nearly 35% of its value since 2022, when remote work started driving up vacancies.
The other side of town: The top seven office properties in downtown St. Paul saw their valuations drop by an average of 16.5%, according to KSTP.
The big picture: Commercial properties pay twice the rate of residential properties, so these declines are significant. Residential owners in Minneapolis now pay 55.6% of property taxes, up from 47.4% in 2020.
- In St. Paul, the office market was in decline well before the pandemic. A spokesperson for Ramsey County, which assesses St. Paul properties, told KSTP the shift in 2026 will be minimal.
- "I think in many ways that cake has been baked," Saint Paul Downtown Alliance President Joe Spencer told the station.
What they're saying: Minneapolis Board of Estimate and Taxation President Steve Brandt lamented the steep and continuous downtown decline. "That tells me that the market hasn't found a bottom yet," he said at a meeting last week.
Between the lines: Since the 2026 report covers assessments only through October 2025, it's a lagging indicator of where the market is going.
- It's been a mix of bad and good news since those final assessments were made.
The bad: The Lumber Exchange Building at 5th and Hennepin sold in February for just $1, an extraordinary reversal of fortune considering its $7.6 million assessment and its $24.3 million sale price in 2019.
- North Loop's Tractorworks building sold in December for $25.5 million, about half of its 2014 sale price and its most recent assessment of $49 million.
The good: Sleep Number's Headquarters, thanks to an expanded data center, sold early this year for $235 million. It was assessed at just $46 million last year.
- The former Northwestern National Life Building at 20 Washington sold for $7 million, a steep discount compared to its 2014 sale price but above its assessed value of $4 million.
What we're watching: Truth-in-taxation notices — which tell property owners how much they could pay in 2027 — go out in November.