MinnesotaIndustrial Avison Young industrial report filled with good Midwest news Dan Rafter February 5, 2020 Share on Facebook Share on Twitter Share on LinkedIn Share via email Chicago might remain the top-performing Midwest industrial market, according to Avison Young’s new Forecast 2020 report. But the mid-sized markets of Minneapolis, Indianapolis and Columbus are also showing plenty of industrial momentum, according to Avison Young’s research. The Minneapolis industrial market is especially interesting. As Avison Young reports, the Twin Cities area lacks large blocks of space, particularly in the region’s Southwest submarket. This is expected to bring new industrial construction to the market in 2020. Avison Young predicts that this new speculative construction will spread into secondary submarkets and into outer communities in the Minneapolis-St. Paul metropolitan area. The reason? The lack of available land sites in the Twin Cities’ urban core and inner-ring suburbs. In other Twin Cities industrial news, Avison Young says that industrial rents here should rise in 2020 because of low vacancy rates and strong demand for e-commerce and reverse logistics. Amazon’s fulfillment center in the Southwest metro and similar developments in the Northwest submarket are fueling e-commerce and will continue to drive growth in the warehouse sector, the company’s forecast report says. Avison Young says that the volume of online sales could spur the need for ‘return centers’ in the local area as the demand for reverse logistics rises. The report had plenty of good news for Columbus and central Ohio, too. Avison Young said that Central Ohio is poised for steady growth in 2020, having outperformed the national average during the past 10 years with GDP growth of more than 28 percent and employment growth of 22 percent. Significant growth in the industrial sector, fueled by the Columbus area’s proximity to surrounding major markets, low cost of living, low taxes and low cost of land has helped establish Central Ohio as a major industrial and distribution hub for the Midwest. Last year was a record-setting year for the Columbus industrial market, with nearly 6 million square feet of net absorption within the first three quarters of the year alone. The Columbus industrial market added more than 5 million square feet of industrial space for the second consecutive year in 2019. Asking rental rates have reached an all-time high of $3.78 per square foot even with this new construction. The growth in the Central Ohio industrial sector is expected to slow somewhat in the early stages of this year as more inventory is delivered ahead of demand. The market should also see more modest rental rate increases than in previous years. Avison Young says that the Indianapolis industrial market should remain strong in 2020, too. This market saw more than 10 million square feet of new industrial inventory added during 2019 and net absorption of 10.8 million square feet, a record for this Central Indiana market. More than 95 percent of that space was absorbed quickly, leaving the market with a fourth quarter 2019 vacancy of 4.2 percent. Among the significant drivers is the market’s central location. Indianapolis has an extensive transportation and logistics network, allowing access to 75 percent of the U.S. and Canadian populations within a 12-hour drive. Several of the new speculative projects currently under construction include mid-size to large modern distribution centers. One examples is a master-planned park called Whiteland Exchange being developed by Jones Development in Whiteland, Indiana, in the South submarket. The master-planned park is located along the I-65 corridor and slated to include 2.4 million square feet of space. Avison Young projections for 2020 include increasing rental growth, construction, leasing and investment volume and decreasing vacancy, all positive signs for this Midwest market. Avison Young’s report said, too, that the speculative construction of bulk distribution centers is expected to slow in St. Louis in 2020. There is currently 5.4 million square feet of industrial space under construction, an 11.6 percent increase from 2018. Vacancy has increased to 8.4 percent and asking rents have decreased from $4.90 to $4.66 per square foot, a 5.1 percent decline. Medical marijuana became legal in St. Louis in April of 2019 and licenses will be awarded this year. Those applying for licenses were required to secure a property before submitting their application, which has resulted in a temporary shortage of industrial space between 30,000 square feet and 60,000 square feet. Those awarded licenses will occupy their properties and the remaining spaces will come back on the market. Asking rents for those properties may decrease initially, Avison Young said.