business

The supply of medical office space in the Twin Cities area has exploded in the past couple of years, but demand has more than kept up with the increase in supply, according to a report by Bloomington-based NorthMarq.

Just 10.4 percent of the 5.5 million square feet of medical office space was vacant as of June 30, NorthMarq said. That's better than the 15.4 percent vacancy rate for non-medical office space.

The vacancy rate for space connected to hospitals or major surgery centers was just 6.4 percent at midyear. Building complexes at Fairview Ridges in Burnsville, Fairview Riverside in Minneapolis, West Health in Plymouth, St. John's in Maplewood and St. Francis in Shakopee were full, NorthMarq said.

The highest vacancies were at St. Joseph's Hospital in downtown St. Paul, at 27.8 percent, and at Hennepin County Medical Center in Minneapolis, at 20.5 percent. But NorthMarq noted that those higher vacancies are because of major expansions and renovations at the facilities. Other medical facilities with expansions planned or underway include Children's Hospitals and Clinics of Minnesota at its Minneapolis and St. Paul campuses, Abbott-Northwestern Hospital and Southdale Medical Center. In Maple Grove, a $120 million hospital is expected to be completed by the end of 2009.

NorthMarq said it expects a pause in new construction activity while the market catches up to absorb the medical space that is being built. Only a few other new projects have been announced this year, the report said.

Bloomington-based Welsh Companies recently handled the sale of one industrial property and the lease negotiations for another, both in Twin Cities suburbs.

The sale, for about $2.1 million, was a 20,000-square-foot building at 9855 Hamilton Road in Eden Prairie.

The seller was a private investment partnership and the buyer was Starkey Laboratories, an Eden Prairie-based maker of hearing aids.

The lease negotiation was a seven-year renewal for the Winsted Corp. at its distribution facility at 10801 Hampshire Av. S. in Bloomington. Winsted, a manufacturer and marketer of technical furniture and accessories, occupies 76,610 square feet of the 159,200-square-foot building. Duke Realty Corp. owns the property.

Susan Feyder • 612-673-1723