See more of the story

Accounting firm KPMG is downsizing its downtown space and will relocate from Wells Fargo Center to North Loop Green, a large mixed-use project still under construction.

KPMG will lease 45,000 square feet at North Loop Green, down from the 60,000 square feet it occupies at Wells Fargo Center.

The deal keeps KPMG in downtown Minneapolis but will move it out of the core of the central business district.

The accounting firm follows Piper Sandler & Co., which signed on as the anchor tenant for North Loop Green, which is near Target Field. Piper Sandler will move from U.S. Bancorp Center in the heart of downtown.

"Our commitment to the Minneapolis market is unwavering. KPMG is continuing to hire and our business continues to grow in the market, as we embrace a hybrid working model," said James Powell, office managing partner for KPMG in Minneapolis, in a statement.

The pandemic and the onset of remote and hybrid work arrangements have hurt the office market everywhere. Many companies signing new leases are taking less space than they did before.

A first-quarter report on the Minneapolis office market from Chicago-based Cushman & Wakefield reported an overall vacancy rate of 30% for downtown Minneapolis. Including space available for sublease there is now 8.6 million square feet of empty office space downtown.

While there is no shortage of available space, some tenants are drawn to new buildings with a full complement of amenities like North Loop Green.

"KPMG's commitment to North Loop Green further demonstrates the flight to quality trend, in which we continue to see tenant demand for curated workplace experiences with wellness-rich amenities," said Bob Pfefferle, managing director at Hines, in a statement.

Houston-based Hines is developing North Loop Green, which will include a 14-story, 350,000-square-foot office building. The project will also have a residential tower with 354 apartments and 96 hospitality units available for short-term rentals. The project will be complete in summer 2024.

Reed Christianson, a principal with the Minneapolis office of Houston-based commercial real estate services firm Transwestern, said that companies want spaces where people want to work.

"They're trying to attract employees to the office," Christianson said.

The North Loop area, abuzz with restaurants, new apartments and Target Field, is another selling point.