Some of the most recognizable skyscrapers in downtown Minneapolis have recently been snatched up by deep-pocketed companies, including offshore conglomerates new to the Twin Cities office market.

Local analysts said the boom in office sales is a signal that large domestic and foreign investors have become more open-minded to the investment potential of the Minneapolis-St. Paul area, which is often overshadowed by larger, gateway cities like San Francisco and New York City.

Some predict the market will see more new investors.

“We are seeing a really interesting cross-section of capital not only from the U.S. but around the world that’s all of a sudden saying, ‘We think Minneapolis is a great place for our investment dollars,’ ” said Matt Knisely, a managing director at Shorenstein Properties. The San Francisco-based real estate investment company bought Capella Tower last year and plans to sell the Washington Square complex a few blocks away in downtown Minneapolis.

In the last three years, almost half of all office space in the Minneapolis-St. Paul area has traded hands, according to real estate firm CBRE. Last year was a record year for Twin Cities office sales, with transactions totaling more than $1.8 billion, according to real estate company JLL.

Some analysts think 2019 will have similar numbers, with possible sales of the renovated Washington Square complex and the Campbell Mithun Tower that could sell by midyear.

Already this year, the SPS Tower, across 7th Street from the Hennepin County Government Center, was purchased by Japanese company Sumitomo Corp. of Americas for $144 million. Last month, the Wells Fargo Center, one of the tallest buildings in Minneapolis, was sold for close to $314 million, the biggest office transaction so far this year.

New owner Connecticut-based Starwood Capital Group, best known for its creation of Starwood Hotels & Resorts, plans to build an amenity floor, featuring a tenant lounge, fitness center and conference space. Starwood also plans to build speculative office suites, and a possible renovation of the first and second floors. Work is expected to be completed by the end of the year.

“Wells Fargo Center presented the opportunity to acquire a trophy office tower with strong downside protection from leases with credit tenants, as well as meaningful upside given the building’s below-market occupancy,” said Mark Deason, head of U.S. asset management at Starwood Capital Group, in a statement to the Star Tribune.

First-tier markets like New York City, Los Angeles, Seattle and Chicago are used to big sales. Earlier this year, the 800 Fifth Avenue building in downtown Seattle sold reportedly for more than $540 million. In March, the 521 Fifth Avenue in Manhattan sold for $381 million, or roughly $828 per square foot.

Yet more investors are being drawn into secondary markets like Minneapolis, according to the recent CBRE Americas Investor Intentions Survey. The Twin Cities rose in the ranks of the most attractive cities for property investment from 11th to a tie for 10th with Boston and Miami, which are both considered higher-tier metros.

Because of its size, the Twin Cities will probably always be seen as a secondary market, said Steve Buss, managing director of capital markets at JLL’s Minneapolis office.

Still, the Twin Cities of late has looked more appealing in comparison to primary markets because of its cheaper property prices, steady STEM employment and long lease commitments from anchor tenants with good credit, Buss said. The Twin Cities also has a lower supply of newly constructed, multitenant office skyscrapers, Buss said, noting that the mixed Gateway tower that is expected to break ground after the sale of the property this month is one of a few projects in recent years that could change the city skyline.

“What they are seeing in those primary markets are low yields and more supply and less high-quality assets,” Buss said.

Secondary markets are often viewed as being more risky because of their location and perceived less liquidity, said Ryan Watts, an executive vice president in CBRE’s local institutional properties group who specializes in office and industrial transactions. But with so many assets trading, it shows that the Twin Cities is indeed a viable market, he said. “You are getting a better return for the added risk.”

Leasing rates, often an indicator of market health, also have been on the rise and a bonus for new investors, said broker Erin Fitzgerald, a principal and leasing expert at real estate firm Transwestern. Rental rates have grown as much as 50% in the last five years at some of the renovated buildings that she has helped lease, such as Washington Square. “We are a really impressive market,” she said.

According to a local quarterly report by CBRE, office asking rates have risen to $15.30 per square foot, which is close to 16% above the 10-year average.

“The knock on the market in the past is that it has been hard to move the needle in terms of rent growth,” said Scott Pollock, executive director of the capital markets team for Cushman & Wakefield. “I think it has become clear that Minneapolis has not reached its ceiling.”

Shorenstein, which has previously owned the LaSalle Plaza and City Center, bought Capella Tower a year ago for $255 million. In June, Shorenstein plans to finish a rooftop patio on the 15th floor that connects both Capella Tower and the adjoining Star Tribune Building that will feature a bar, fire pits and games.

The diversity of businesses, expansion of public transit, high livability and low cost of doing business relative to other cities has made the Twin Cities an attractive market, said Knisely, of Shorenstein.

“We have been encouraged by the number of new entrants into the Minneapolis investment market from capital around the world,” Knisely said.

In the last few years, Asian-based companies new to the Twin Cities office market have been making deals. HNA Property Holdings, a subsidiary of Chinese conglomerate HNA Group, bought City Center, which is made up of the 33 South Sixth Street tower and three-level retail mall, in 2016 for $315 million.

The complex was sold to South Korean-based Samsung Life Insurance last year for $320 million.

Singapore’s Mapletree Investments, which has experience with residential properties in the Twin Cities, bought the Fifty South Sixth office tower for $258.5 million in December 2017. It was the company’s first office purchase in the United States. This year, Sumitomo bought SPS Tower, its first Minneapolis real estate investment.

“A good thing for this market is you got these major players from Singapore, Korea and Japan. … That leads to other investors,” Buss said, adding that it especially helps Minneapolis get on the radar of investors from those countries.

Sumitomo and Samsung had surveyed the Twin Cities market for years before making purchases.

“As we get more and more of the offshore capital investing in the Twin Cities, it makes us a more well-known market,” Watts said.

Another effect of the sales activity is the prospect of higher prices, Watts said.

While new investors are a positive indicator about the market, it would be helpful that new owners are connected with the local community, said Anna Coskran, a principal in charge of real estate services at real estate and project management firm NTH.

“I would hope that the new owners that aren’t local will have the same commitment to the community as previous owners have had,” said Coskran, who pointed to how local property owners helped form the Minneapolis Downtown Improvement District.