The Minneapolis industrial market wasn’t immune to the negative pull of COVID-19 and the economic slowdown. But this sector, and this city, did show signs of strength in the second quarter, according to research from CBRE.
According to CBRE’s Minneapolis/St. Paul second quarter industrial report, quarter-over-quarter leasing in the region’s industrial market was down 31 percent. And while the market did see negative absorption in the quarter, a single move-out of nearly 400,000 square feet tipped the overall absorption rate into this territory.
According to CBRE, net industrial absorption in the Minneapolis/St. Paul market was negative 97,241 square feet in the second quarter. Vacancy, though, remained low at just 4.6 percent.
The market saw 672,000 square feet of industrial deliveries in the second quarter, including 192,000 square feet of speculative space. Another 2.9 million square feet of industrial space is under construction in the St. Paul and Minneapolis area.
In one of the biggest industrial deals of the quarter, Link Industrial Properties closed on the 63-property, 6-million-square-foot CSM portfolio worth $551 million. This is evidence of continued interest in the Twin Cities’ industrial market, according to CBRE.
Industrial space currently under construction includes the 302,644-square-foot Canterbury Business Center in Shakopee, Minnesota, and the 205,920-square-foot Lexington Logistics Center in Eagan, Minnesota. In leasing activity, Kurita/U.S. Water leased 156,000 square feet during the quarter, consolidating three locations into a new headquarters facility as part of a build-to-suit in Brooklyn Park, Minnesota.
And FCA (Fiat Chrysler) signed a lease for 155,000 square feet at 3440 Winpark, while Strategic Warehouse signed a 101,440-square-foot lease at Carmen Distribution Center.
Not all submarkets, of course, performed equally. The Northwest submarket led all submarkets with 43 percent of all completed industrial transactions during the quarter. The South Central submarket recorded 21 percent of all completed transactions.
Four of the top five second quarter investment transactions were single-tenant properties, including the 855,000-square-foot acquisition by MetLife Real Estate Investments of the Amazon facility in Shakopee. Another big investment transaction was King Solutions’ sale/leaseback of 283,788 square feet in Dayton, Minnesota.
As far as the future goes? CBRE is optimistic that industrial will rebound quickly from its COVID-19-inflicted slowdown. CBRE pointed to increased demand for e-commerce as one reason for its optimism. This rising demand will increase the need for additional warehouses across the country. CBRE estimates that for every $1 billion in growth in e-commerce sales, there needs to be an additional 1.25 million square feet of warehouse and distribution space.
The industrial market has also seen a lower drop in unemployment when compared to other sectors. CBRE reports that industrial employment has dropped 8 percent compared with 13 percent for all industries combined.