The best way to describe the Minneapolis-St. Paul industrial market through the first half of 2026? How about stable?
In its second quarter Minneapolis-St. Paul industrial report, Colliers said that the Twin Cities industrial sector continues to benefit from solid tenant demand, especially from larger users and third-party logistics companies. At the same time, developers are continuing to deliver new product, causing vacancy rates to tick higher as recently completed buildings work through their lease-up stages.
But what about the number? The Twin Cities industrial market posted net absorption of 1.05 million square feet during the second quarter, only slightly below the 1.12 million square feet recorded in the first quarter, according to Colliers. Year-to-date net absorption surpassed 2.1 million square feet, fueled largely by occupancies in newly delivered logistics facilities.
Colliers said several large occupancies helped drive demand during the quarter, including Amazon’s move into a 225,550-square-foot facility in Woodbury and multiple build-to-suit projects completed in the East and South Central submarkets.
Despite those gains, the Minneapolis-St. Paul overall industrial vacancy rate climbed to 5.4% in the second quarter, up from 5.3% in the previous quarter, according to Colliers. Total vacant industrial space in the Twin Cities market reached 22.3 million square feet.
Colliers attributed the increase primarily to new supply outpacing leasing activity in several submarkets and to tenants moving out of older facilities in favor of newer, more modern space. Sublease availability also continued to rise, reaching about 4.3 million square feet, its highest level during the current market cycle.
Not surprisingly, the strength of the industrial sector varies considerably across the Twin Cities market. Vacancy pressures remain most pronounced in the South Central and Southwest submarkets, where the recent deliveries of bulk warehouse space have lengthened lease-up periods. In contrast, the North Central and Northwest submarkets continue to post relatively stable fundamentals, supported by lower levels of available space and more limited construction pipelines.
The Minneapolis-St. Paul market’s development pipeline expanded significantly during the second quarter. According to Colliers, more than 6.7 million square feet of industrial space is currently under construction, up sharply from 2.5 million square feet in the first quarter.
And in good news for the market, much of that pipeline comes with pre-existing tenants. More than 4.8 million square feet of the space under development consists of build-to-suit projects, including Amazon’s 3.6-million-square-foot Project Nova facility in Eagan. This heavy concentration of build-to-suit construction is helping reduce concerns about oversupply.
Several recently completed projects have already reached full occupancy. These include a 286,000-square-foot warehouse facility at 10585 County Road 101 in Corcoran, the 174,288-square-foot Cobalt Business Center in Mendota Heights and a 103,456-square-foot industrial building at 5400 Centerville Road in White Bear Township.
At the same time, asking rents remained stable throughout the Minneapolis-St. Paul market. Average industrial asking rents held steady at $9.43 a square foot on a triple-net basis during the second quarter. In its report, Colliers credited elevated replacement costs and limited competition among newer properties have enabled landlords to maintain pricing discipline despite moderating leasing activity and rising vacancy.
Investment activity remained active but selective. The market recorded 58 industrial property sales totaling approximately $282 million during the second quarter. Investors continue to favor well-located logistics facilities, while older and functionally obsolete buildings face greater pricing pressure.
Overall, Colliers said the Minneapolis-St. Paul industrial market remains fundamentally healthy, supported by positive absorption, disciplined development activity and long-term rent stability even as the sector works through an influx of new supply.
