Commercial landlords in the Fargo-Moorhead, North Dakota market are making concessions on pricing and offering tenant incentives as demand for large-footprint spaces weakens, according to Andy Westby, president and managing broker at Goldmark Commercial Real Estate. Supply has outpaced demand for medium and large spaces, creating a tenant-favorable environment that contrasts sharply with conditions in smaller properties.
The slowdown in leasing activity among large office, retail, and industrial tenants has left landlords with more vacant space and greater pressure to fill it. “It’s turned into a bit of a tenant’s market, especially as the footprint of that space grows,” Westby says.
To attract tenants, landlords are offering concessions that were rare during the post-pandemic leasing surge. These include reduced base rents, free rent periods, and fit-up allowances, which are financial contributions toward tenant improvements. Westby notes, “Owners have had to make more concessions on either pricing or maybe free rent or fit-up allowances in those cases.”
In 2025, total leasing activity in the Fargo-Moorhead market dropped 43%, falling from 1.1 million square feet to 614,000 square feet. The decline was concentrated among industrial spaces, where larger tenants paused expansion plans. Westby attributes the slowdown to cyclical market dynamics rather than structural weakness. The immediate effect has been greater negotiating leverage for tenants seeking larger spaces.
Small Spaces Stay Supply-Constrained
While landlords with large vacancies are making concessions, the same is not true for small-footprint spaces. Properties between 1,000 and 2,000 square feet, particularly offices, retail spaces, and small-bay industrial units, remain in short supply and command strong pricing.
“There’s still real good activity at the lower square footage, and so we haven’t seen as much need for discounting,” Westby says. “The 1,000 to 2,000 square foot office or retail spaces or small-bay industrial spaces have performed very well. It’s still hard to find small bay, and so pricing there has been strong.”
The difference in performance between large and small spaces stems from their tenant base. Small spaces are sought by local businesses and service providers looking to expand or relocate. Large spaces, often leased by companies tied to national trends or corporate strategies, have seen demand decline as these tenants delay new leases or reduce their real estate footprint.
The supply constraint is most acute in small-bay industrial segments. Even as the overall industrial vacancy rate in Fargo-Moorhead rose from 2.8% to 4.7% over the past 18 months, small-bay spaces remain difficult to secure. This imbalance has kept pricing stable and minimized the need for landlord concessions in that segment.
Downtown Fargo Landlords Cut Prices
The tenant-favorable environment is most visible in downtown Fargo, where retail vacancy has reached about 80%. Downtown landlords are lowering prices on both lease and sale transactions to address elevated vacancy and reduced demand.
“We are seeing pricing adjustments, both on the lease and the sales side within the downtown market,” Westby says. “Like everything, it’s cyclical, and at some point we’ll start to see that activity pick back up. But for now, we have been at a bit of a low point in terms of leasing and sales volume.”
Downtown Fargo has seen significant investment over the past two decades, with older buildings renovated and new construction adding retail and office space. Demand has not kept pace, and landlords are adjusting their expectations and pricing to attract tenants.
Suburban submarkets have remained more stable. Moorhead is seeing renewed investment in its downtown corridor, with lower vacancy and stronger tenant demand drawing capital away from Fargo’s downtown.
Signs Point to Market Recovery
The current tenant-favorable environment may be part of a cyclical correction rather than a permanent shift. Industrial leasing activity has started to rebound in early 2026, with several large deals under negotiation. The industrial vacancy rate has dropped from 4.7% to 4.1% since the end of 2025, a 13% reduction in available inventory.
“We’re seeing really good momentum early now in 2026,” Westby says. Westby expects the industrial market to continue improving as the inventory buildup of recent years begins to reverse.
Office vacancy, which peaked above 11% in 2025, has also started to decline, falling to just over 10.3%. Westby reports increased inquiries from tenants seeking spaces above 10,000 square feet, a segment that struggled to attract demand in 2024 and 2025.
Whether tenant-favorable conditions persist will depend on how quickly demand recovers relative to new supply. For now, landlords with large vacancies are adjusting their expectations and offering incentives to attract tenants. Tenants seeking larger footprints may find this an opportune time to negotiate favorable lease terms before the market tightens.
The market’s trajectory will be shaped by the pace of economic recovery, local business expansion, and the rate at which excess inventory is absorbed. While smaller spaces remain competitive, landlords with larger vacancies must adapt to tenant expectations in a market where the balance of leverage has shifted, at least for now.
