A shift in momentum defined the Minneapolis–St. Paul industrial market to start 2026, as a sector that had long ridden a wave of steady demand hit a notable speed bump.
That slowdown showed up most clearly in net absorption, which turned negative in the first quarter, according to CBRE’s latest industrial figures report. The market recorded negative 112,458 square feet of net absorption, a sharp reversal from the gains posted in both the fourth quarter of 2025 and the first quarter a year earlier.
The swing is striking not just for its direction but for its size. Minneapolis–St. Paul’s industrial sector saw a 703,000-square-foot drop in absorption compared to the previous quarter and a year-over-year decline of 1.5 million square feet. After several years in which tenants consistently filled new space, the early months of 2026 suggest that occupiers are taking a more cautious approach.
That caution is also reflected in vacancy and availability rates, both of which ticked higher during the quarter. Overall vacancy rose to 4.2%, an increase of 30 basis points from the previous quarter and the same period last year. Direct vacancy came in just slightly lower at 4.1%, indicating that most of the available space is being marketed directly by landlords rather than through subleases.
Availability, a broader measure that includes both vacant space and space that will soon be vacated, climbed to 6.8%. That’s up a full percentage point from 5.8% a year ago, another sign that more industrial space is coming to market even as tenant demand softens.
Developers, for their part, appear to be responding to this shift with a more measured approach. The pipeline of industrial space under construction fell to 2.5 million square feet in the first quarter, down 15.8% from the fourth quarter of 2025 and nearly 20% from a year earlier. That total is a far cry from the market’s recent peak of 9.6 million square feet in the second quarter of 2023, representing a drop of more than 70%.
New deliveries are slowing, too. The amount of industrial space completed and brought online fell 21.2% from the previous quarter and 30.8% year-over-year. After a period of aggressive development, builders are clearly pulling back, likely in response to rising vacancy and a more uncertain demand environment.
Even with these headwinds, one key metric has remained resilient: pricing. The average asking rent for industrial space in the Twin Cities stood at $9.34 per square foot in the first quarter, essentially unchanged from the prior quarter. On a longer-term basis, though, rents are still well above where they stood just a few years ago, up 12.5% from the first quarter of 2023.
Leasing activity offers another sign that the market isn’t stalling so much as recalibrating. More than 2.8 million square feet of industrial space was leased during the quarter across transactions of all sizes. Notably, the average lease size climbed to more than 20,000 square feet, a 13.1% increase from the fourth quarter and a 4.2% gain from a year earlier.
That combination of larger deals but fewer net gains in occupied space suggests that while tenants are still making moves, they may also be consolidating or giving back space elsewhere.
