The developer of one of the newest and most ambitious mixed-use developments in downtown Minneapolis has landed a major anchor tenant.

Hines said Tuesday the investment firm Piper Sandler & Co. will occupy 113,000 square feet, or about a third of the total office space, in the North Loop Green, a sprawling new project near Target Field in the North Loop neighborhood.

"We are proud to offer such a differentiated and cutting-edge office experience in Minneapolis and to continue to welcome top-tier tenants like Piper Sandler & Co. and their talent," said Bob Pfefferle, managing director at Hines.

The move, which will take place in 2025, creates another hole in the office market in downtown's Central Business District, or CBD, where Piper Sandler now occupies a few floors in the U.S. Bancorp Center at 8th Street and Nicollet Mall.

The brokerage firm was a subsidiary of U.S. Bancorp when that building opened in 2000, and it was spun off as a standalone company in 2003.

Though about 60% of downtown office workers have returned to work at least part of the week, the CBD is unlikely to return to pre-pandemic volumes of people for some time. In the last month, Nordstrom Rack and Marshalls said they were vacating their spaces along the Nicollet Mall.

The latest market reports show that about a third of the office space in downtown is vacant, though there have been several notable lease renewals at IDS Center, downtown's biggest building, and others.

One of the most significant downtown office coups of late was the recent completion and opening of RBC Gateway Tower, which is considered fully occupied. And Piper Sandler's decision to move to a different part of downtown is still seen as a vote of confidence for the city.

"Our new space is an investment in our employees and will accommodate our growth and support our commitment to delivering innovative solutions to our clients," Shawn Quant, chief information and operations officer for Piper Sandler, said in a statement.

It's also another example of what commercial brokers say is a growing trend among office tenants: a "flight to quality" that's helping fill new spaces.

The Twin Cities office of Jones Lang Lasalle (JLL), a commercial brokerage and data firm, has been tracking this trend. Its latest Tenant Migration report shows that tenants are upgrading when they move. They are gravitating toward five submarkets in the metro area, led by the downtown Minneapolis CBD.

Next was the "West Submarket," which includes a popular redevelopment area along I-394 in St. Louis Park. That's where Ryan Cos. said late last month that it had sold its 10 West End office building and would build a second one to spec next door.

The JLL report showed that most tenants were looking for Class A spaces in newer buildings with more amenities, efficient mechanicals and advanced technology.

On Tuesday, JLL's research director Sam Newberg said that while 90% of the moves were a downsizing, most moved to newer buildings.

"The takeaway is that the Minneapolis CBD was and still is a desirable location because of its central location and the fact that it's the primary downtown in the Twin Cities," Newberg said. "In this new era of office leasing, the best locations still do well."

North Loop Green has been in the planning process for several years and officially will open in early 2024. Designed by ESG Architects, the development has 350 rentals, 100 hospitality units that can be used as short-term rentals and 15,000 square feet of space for restaurants/bars and retail.

The office component includes more than 350,000 square feet of space. With terraces on every floor, flexible workspaces, optimized indoor air quality and a rooftop amenity terrace, the project is targeted at tenants who want the latest amenities.