At a time when more workers are returning to their downtown offices, AT&T's employees are moving out of its namesake tower in Minneapolis.

The telecommunications company said it's moving all operations currently done in the 34-story building at 901 Marquette Av., to a facility about 10 miles south in Bloomington.

"The move will be complete by the end of August, allowing us to use our office space more effectively," said Clay Owen, director of public relations for the company. "It's important to note that these jobs will remain in the greater Minneapolis area, and we remain committed to Minnesota."

Owen declined to say how many people the move would affect. Shari Wojtowicz, president of the Communications Workers of America Minnesota State Council, said the decision will impact at least 260 workers in the building, mostly teleconference specialists and collections workers who have worked there since 1992 and returned to their offices late last year.

She said that figure doesn't include managers, sales people and other nonunion workers, including many who might still be remote or coming into the office periodically.

Twin Cities-based Ryan Companies built the tower and now manages it. Jami Klausen, Ryan's general manager of the tower, said as AT&T prepares to relocate later this year, discussions are just beginning on what the new name of the tower will be.

"AT&T Tower is one of the iconic fixtures of the Minneapolis skyline, and we look forward to starting a new chapter," Klausen said. "AT&T has been a valued, long-standing tenant, and we wish them the very best."

The news, which Axios first reported, comes as many other workers are slowly returning to downtown. Persistently high office vacancy rates have dogged the area since the beginning of the pandemic.

AT&T has been an anchor tenant in the building since its inception in 1991. The tower — clad in glass that reflects its neighbors, including the Foshay Tower — is a distinct presence in the skyline because the crown of the tower appears to unfurl like a blooming flower.

Throughout the years, the company has slowly shrunk its space within the building and now occupies only about 95,000 square feet on five lower floors, according to commercial real estate broker Cushman and Wakefield.

"This is an understandable decision," said Tom Tracy, executive director at Cushman and Wakefield. "Just like everybody else, they're doing more with less and are consolidating."

Tracy said while leasing velocity downtown remains light, the major tenants, including law firms and financial services companies, are doubling down on their commitment to downtown.

"While they may be right-sizing or moving to different spaces because of the way they're doing business, they are generally saying, 'We are going to stay downtown.' "

AT&T Tower is more than 80% leased, according to Ryan Companies, but the office vacancy rate for the central business district in downtown Minneapolis during the first quarter of 2023 was 24.3%. That's only slightly behind the south/airport submarket and 3 percentage points higher than the metro area, according to new data from Cushman and Wakefield. Per the firm, the vacancy rate of the central business district was 30% when including vacant space available for sublease.

The firm said last year new leases accounted for nearly 890,000 square feet of office space in the central business district in downtown Minneapolis, a 19% increase from the previous year. Class A space like the AT&T Tower accounted for 54% of all leasing activity last year, a significant increase from the previous year.

"The best buildings are outperforming all others," said Tracy, noting that landlords are wooing prospective tenants with top-quality spaces and amenities aimed at luring workers back to the office.

Tracy and his colleagues recently leased nearly 45,000 square feet of office space at The 15 Building, a downtown Minneapolis landmark known for its colorful mural of Bob Dylan. When leasing began in February 2020, the 12-story, 130,000-square-foot building was 70% leased.

Despite wins like that for downtown property owners, AT&T's decision was a not a surprise to insiders.

"It's been in the works for quite a few months," said Steve Cramer, CEO of the Minneapolis Downtown Council.

Cramer said he sees the move as another case of a company adjusting its real estate portfolio in the changing office market more than as a rejection of downtown.

"It's not great news, but I can understand it," Cramer said. "It's a lot more about, 'This is the most economical and efficient real estate decision for our company.' "