Blue Cross and Blue Shield of Minnesota is vacating its headquarters building in Eagan, the latest Twin Cities company to consolidate its real estate holdings because of the shift to hybrid work.
Earlier this week, UnitedHealth Group confirmed it was not renewing the lease on the main building of its Minnetonka corporate campus. The full campus of Thomson Reuters, also in Eagan, is on the market as the information giant looks for smaller Twin Cities office space.
Corporate real estate moves could become more frequent as leases come up for renewal.
Offices reached a crucial national benchmark at the start of this year: They're at half their prepandemic occupancy, according to a survey by the Kastle office security firm. About 13% of the space nationally was up for lease or sale at the end of last year, with researchers predicting that real estate values could plunge 39% from pre-pandemic levels.
The switch to hybrid work has already led to a smaller footprint for Blue Cross on its 25-acre site, with two buildings behind the headquarters at 3535 Blue Cross Road previously left vacant, the insurer said.
"Since Blue Cross moved to a hybrid-remote work model in November 2021, we have experienced low utilization and occupation of our current office space," said Jim McManus, spokesman for the insurer. "By shrinking our real estate footprint, we believe the company can generate a more collaborative, productive and enjoyable environment for those times when on-site work takes place."
The 443,000-square-foot headquarters was built in 1969, according to Dakota County property records.
"Corporations are trying to discover the new normal. Unfortunately for the owners of office buildings and office campuses that means there is some downsizing happening," said Mike Salmen, managing director for the Minneapolis office of Houston-based Transwestern, a commercial real estate services firm.
Salmen said the development of new office designs and new ways of working remains a work in progress for employers.
"As a city, we are preparing for needed adjustments in office space," said Eagan City Administrator Dianne Miller. "We understand that businesses regionally, nationally and around the world are re-evaluating their needs."
For example, she said, the city is working on a plan for the redevelopment of the 1.1 million-square-foot Thomson Reuters campus at 610 Opperman Drive and some private properties around Eagan Central Park.
She pointed to other successful projects such as the redevelopment of Cedarville Mall into the Twin Cities Premium Outlet Mall, the former Lockheed Martin industrial site into Central Park Commons and the old Northwest Airlines headquarters campus into Viking Lakes (with the Minnesota Vikings' practice facilities).
Thomson Reuters and Blue Cross and Blue Shield of Minnesota are Eagan's two largest employers.
Blue Cross and Blue Shield of Minnesota laid off about 80 employees in February as part of an ongoing review of its operations but still has about 3,000 workers, McManus said.
Blue Cross does not own the headquarters. It sold the buildings on the campus in 2012 to New York-based W.P. Carey Inc.
At the end of last year W.P. Carey, a publicly traded real estate investment trust, had a portfolio of 1,449 properties in 26 countries. According to the company's latest financial filing, it owns 3.7 million square feet of property in Minnesota.
This report includes reporting from the New York Times.