Commercial real estate experts predict that downtown St. Paul will flourish as new transportation options, including light rail, become available in the next year.

"Transportation is a key to attract talent," said Aaron Barnard, senior director of brokerage services for Cushman & Wakefield/NorthMarq.

Now home to 16.8 million square feet of office space — about a third of which is occupied by government agencies — the overall occupancy rate for the central business district is holding steady at about 90 percent, according to an 18-page report issued Monday by the Greater St. Paul Building Owners and Managers Association (BOMA).

But the commercial real estate community is watching closely as the city's downtown attempts to change from an office-dominated, roll-up-the-sidewalks-at-5-p.m. environment to one where the populace increasingly "lives, works and plays," said Barnard. (Downtown's residential population, now at 8,135 people, has increased 28 percent in the past decade.)

Last December, the $243 million renovation of the historic Union Depot into a multimodal transportation hub was completed. The $957 million Green Line light-rail service, which will connect the Minneapolis and St. Paul downtowns, is scheduled to begin in mid-2014. The city also has made a number of moves to encourage bicycle traffic, and there's talk of developing streetcar service.

"For business owners, how to get talent to offices is a big concern, and if light rail makes it more convenient, that's a positive," Barnard added.

Light-rail trains will be running to St. Paul on the Green Line next year.

For now, the downtown St. Paul office market appears to be humming along with few hiccups. The report found that the occupancy rate for competitive (nongovernment and non-owner-occupied) space in downtown increased from 79 percent in 2012 to 80.5 percent this year.

Occupancy rates in the past year for top-notch Class A space increased from 86.8 percent to 87.3 percent, and there were several significant lease renewals, the report noted. They include the engineering, architectural and planning firm TKDA renewing its lease for 50,000 square feet and then increasing its footprint by 6,000 square feet at UBS Plaza, and Infor, the parent company of Lawson Software, renewing its lease for 130,000 square feet in Lawson Commons.

"Renewals are a really good sign" that tenants are satisfied with their space and their environs, said Eric Rapp, vice president in Colliers International's Twin Cities office.

Occupancy in Class B buildings, which tend to be older and consume the biggest chunk of downtown's competitive office space, increased from 75.7 percent to 77 percent. And Class C occupancy increased from 80.4 to 86.9 percent.

There was a bit of ebb and flow in overall building square footage this year, as the market shifted. For example, the Ramsey County Government Center-West, with 400,000 square feet, was vacated. It's unclear what will take its place along the Mississippi River waterfront.

Janet Moore • 612-673-7752