The industrial sector boomed throughout the United States last year as the COVID-19 pandemic fueled even more demand for online shopping among consumers wary about shopping at brick-and-mortar locations. And as demand for online product grew, the industrial market responded, opening new distribution and fulfillment centers across the country.
This helps explain why the Minneapolis-St. Paul industrial market broke records in 2020, seeing more portfolio trades than in any other year.
According to the latest research from JLL, the Minneapolis-St. Paul industrial market ended 2020 on a strong note, with 766,074 square feet of positive absorption for the year and a market vacancy rate of just 6 percent in the fourth quarter.
That’s just some of the good news from JLL’s fourth quarter Minneapolis-St. Paul Industrial Insight report. The report also provides evidence that 2021 will be a busy year for industrial in the Twin Cities, too. According to JLL, 642,000 square feet of new industrial space was already under construction as of the close of the fourth quarter of last year.
Of course, good news is far from rare in this sector. As JLL points out in its report, since 2018 the Twin Cities industrial market has captured at least $1 billion in investment annually. For both warehouse and flex assets, that investment peaked at $1.7 billion in 2019, with 2020 closely trailing with $1.6 billion in total transaction volume.
Last year saw some major deals. That includes Blackstone’s record-breaking acquisition of CSM’s industrial portfolio in the third quarter of 2020 and Prologis’ acquisition of Liberty Property Turst in the second quarter.
JLL says that the mix of investors changed significantly last year. Institutional and REIT investment now acount for 62 percent of the Minneapolis-St. Paul market’s industrial buyers. In 2019, that share was just 40 percent.
JLL points out, too, that build-to-suit construction propped up absorption in 2020. Anderson Window’s 350,000-square-foot expansion was completed in the fourth quarter at its manufacturing campus in Cottage Grove, Minnesota. In the second quarter, Graco expanded its Rogers, Minnesota, facility by nearly 500,000 square feet.
And the future? JLL says it looks bright. That’s partly because of the Twin Cities’ strength in the growing life sciences industry. Life scienses is hot, partly because of the growing need for public health solutions in a pandemic and partly because the U.S. population continues to age.
JLL says that the Northwest submarket surrounding Plymouth and the Northeast submarket extending from Northeast Minneapolis into its adjacent suburbs are poised to capture growing user demand among medical device and digital health users.
