High interest rates and persistent inflation? Even that can’t stop the Minneapolis-St. Paul industrial market, according to the latest research from JLL.
According to JLL’s second quarter Minneapolis-St. Paul industrial report, the Twin Cities region saw more than 4 million square of leasing activity in the second quarter of this year. That resulted in more than 500,000 square feet of net absorption.
And this demand for industrial space doesn’t seem ready to slow. JLL also reported that users leased more than 800,000 square feet in new spec developments in the Minneapolis-St. Paul market.
This included Sweet Harvest Foods leasing 360,000 square feet at the Lakeville Logistics Center, Van Meter leasing 104,290 square feet at Cottage Grove Logistics Park 1 and R&R Machinery Moving Company taking 54,733 square feeet at the North Central Commerce Center. Overall, spec industrial buildings in the Minneapolis-St. Paul market are 45% leased on average at the time they are completed, according to JLL.
Even as the nation struggles with the economic uncertainty brought on by higher interest rates and stubborn inflation, the U.S. industrial sector has continued to thrive. It comes down to a simple formula: Online shoppers want their products delivered quickly. To do this, companies need new warehouse and distribution space.
It’s why construction crews broke ground on nearly 2.1 million square feet of spec development in the Twin Cities market in the second quarter, according to JLL’s numbers. And these projects are taking place despite today’s challenging commercial financing environment.
Overall, more than 8.1 million square feet of new industrial space is under construction in the Twin Cities market, and nearly 7 million square feet of spec construction is likely to hit the market in 2023.
Despite the influx of new product, the vacancy rate remains low here. JLL reported that the total industrial vacancy rate for the Minneapolis-St. Paul area fell to 3.6% in the second quarter.
In an example of a big industrial deal in the market last quarter? Capital Partners continued to increase its Minneapolis-St. Paul industrial market share with a $71 million, five-building portfolio acquisition from Artis REIT.
