The industrial market in the Minneapolis-St. Paul region experienced a slight decline in vacancy rates during the fourth quarter of 2024, according to the latest report from Avison Young. The dip in vacancy rates was largely attributed to an increase in leasing activity and positive net absorption, signaling continued strength in the local industrial sector.
The market’s industrial vacancy rate dropped to 5.3% in the fourth quarter, down from a peak of 5.7% in the third quarter of 2024. This marked the first decrease in vacancy rates since the fourth quarter of 2022. According to Avison Young, the Twin Cities’ vacancy rate remains notably lower than the national average of 7.3% and is the second lowest among Midwest markets, trailing only Detroit’s 4.4% vacancy rate.
Avison Young credited a surge in leasing activity at the end of the year for the improved vacancy rates. The market also benefited from positive net absorption, with 1.4 million square feet absorbed in the fourth quarter. The report highlighted strong demand for high-quality industrial space and the completion of several significant build-to-suit developments as key drivers of this positive trend.
“With much of the construction pipeline comprised of build-to-suit developments, vacancy rates should continue to stabilize as these projects are delivered fully occupied,” the report stated. Avison Young noted that the limited amount of speculative construction is being quickly absorbed due to high demand for modern industrial facilities.
The Minneapolis-St. Paul industrial market also recorded robust sales activity in 2024, reaching $1.35 billion in sales volume, the highest since 2022. This represents a year-over-year increase of over $402 million compared to the $948 million transacted in 2023. According to Avison Young, 2024 marked one of the strongest years for industrial sales volume since 2015, surpassed only by the heightened demand seen in 2021 and 2022 during the post-COVID recovery period.
The 2024 sales volume exceeded the pre-COVID (2015-2019) average of $803.3 million by more than 68%, although it fell slightly short of the 2020-2023 average of over $1.48 billion.
The report also noted that the Minneapolis-St. Paul industrial market continues to outperform many other Midwest markets in terms of vacancy rates and demand for space. “The Twin Cities’ low vacancy rate and strong absorption figures reflect the ongoing strength and resilience of the region’s industrial sector,” said Avison Young.
Looking ahead, Avison Young expects vacancy rates to remain stable as new build-to-suit projects come online fully occupied. The high demand for modern, high-quality industrial space is anticipated to support continued leasing and sales activity in 2025.
