May 12, 2025

LEGISLATIVE SESSION

Select individual bills that went through the House and Senate are now bundled into omnibus bills. Eventually, House and Senate leadership will negotiate final bills that must be passed by both bodies before heading to the Governor’s desk for signature or veto. The current deadline to do this is May 19. Typically, the executive branch is also included in negotiations as well, depending on the timing of when the bills are passed.

The House tax committee introduced their omnibus tax bill, with a budget target of $40 million of tax increases or tax aid reductions. For commercial real estate, one concerning issue is a land value taxing district pilot project in Minneapolis and St. Paul. We have been lobbying members in the House and Senate regarding our opposition to this idea which could unfairly tax properties because the improvements to properties are not taken into consideration—only the land has value. We have sent letters in opposition as well. Unfortunately, the omnibus bill does not include the bills we support, such as reduction of the state general levy property tax or the Catalyst for Underutilized Buildings (CUB) credit.

In the House’s Workforce, Labor and Economic Development omnibus bill, there is a reduction in what little is left for job creation efforts through DEED. We partnered with the Economic Development Association of Minnesota (EDAM) and others to share our concerns about any reductions in these vital programs, including brownfield clean-up grants.

Meanwhile, House members are also debating priorities on whether thousands of undocumented immigrants should be receiving free healthcare benefits and college education at taxpayer expense.

While May 19th is just around the corner, a lot can change in this final negotiation stretch. As a result, we will be paying close attention to all of the moving pieces.

CITY OF MINNEAPOLIS

On the local front, NAIOP is partnering with BOMA Minneapolis and MNCAR to oppose a proposal by Councilmembers Chavez & Wonsley which would require a 60-day advanced notice of sale to all tenants and the city in Minneapolis. Remember that all Minneapolis council members as well as the mayor are up for re-election this year.

NATIONAL OFFICE OCCUPANCY RATES

Below is a recent national office occupancy breakdown from the Bureau of Labor Statistics and Moody’s Analytics. (Note that the Twin Cities is on the bottom of the chart.) Perhaps this will change soon with Governor Walz’s order for state employees to return to the office 50% by June 1.

SURPLUS/DEFICIT THROUGH FISCAL YEAR 2024

The following is an interesting chart from real estate economist Dr. Mark Dotzour showing the net interest on the Federal budget deficit is now the third largest expenditure. On a positive note, he also said that it will be a good window to refinance in the next two years. He is bullish for commercial real estate and does not expect a significant recession in 2025.

METRO AREA EMPLOYMENT PROJECTIONS

For those of you who like to forecast demand for the future, see the chart below highlighting employment demand projections.

Source: Minnesota DEED