The Minneapolis–St. Paul industrial market continued to attract tenants and investors during the third quarter of 2026. But as more warehouse space becomes available and large vacancies take longer to fill, vacancy rates are ticking up, according to a new report from Colliers.
Net absorption totaled approximately 540,000 square feet during the third quarter, bringing the market’s year-to-date total to nearly 2.7 million square feet. Yet the region’s overall industrial vacancy rate edged up to 5.5%, compared to 5.4% in the second quarter and 4.5% during the third quarter of 2025.
The numbers point to a market that remains healthy but is becoming more selective. In its Q3 2026 Industrial Report: Minneapolis–St. Paul, Colliers found that modern, well-located industrial properties continue to attract interest, while older buildings and facilities with less functional layouts face greater competition.
Tenants have more options than they did a year ago, particularly when searching for large warehouse and distribution facilities. As a result, building functionality, transportation access, power availability, labor access and occupancy costs play increasingly important roles in leasing decisions.
Warehouse demand drives absorption
Warehouse and distribution properties accounted for most of the region’s occupancy growth during the third quarter. Manufacturing properties, meanwhile, recorded modestly negative absorption.
The distinction highlights the importance of property type in determining how individual industrial buildings perform. Companies seeking modern distribution facilities continue to support demand, but relocations into newer buildings can leave older properties vacant, creating additional competition for landlords.
Overall, the market recorded approximately 23 million square feet of vacant industrial space at the end of the third quarter. Direct vacancy remained essentially flat at 4.9%, while sublease availability increased to 4.8 million square feet, largely because of a limited number of larger manufacturing offerings.
The pressure is concentrated in large warehouse blocks, recently delivered buildings and properties that do not meet current tenant requirements. That concentration suggests the increase in vacancy is not affecting every part of the market equally.
Geography also matters. Colliers reported an overall vacancy rate of 2.1% in the outlying submarkets, compared with 5.3% in the Northwest, 7.4% in the Southwest and 8% in the South Central region. The East submarket posted an 8% vacancy rate, while the Midway area recorded 5.8%.
Warehouse and distribution vacancy varied considerably across these areas. The Southwest submarket recorded a 9.4% rate, while the Northwest stood at 8.1%. By contrast, North Central warehouse and distribution vacancy was 2.8%.
Asking rents soften
Rental rates also reflected the changing balance between landlords and tenants.
Colliers reported an overall asking rate of $9.28 per square foot on a triple-net (NNN) basis during the third quarter, down from $9.41 in the second quarter. The latest figure was only slightly above the $9.23 rate reported a year earlier.
The decline does not necessarily signal widespread pricing deterioration. Colliers attributed the change to more balanced leasing conditions and shifts in the mix of space being marketed.
Newly delivered Class-A industrial properties have generally maintained their asking rents or recorded modest increases. Landlords with larger vacancies, however, may need to offer concessions, building improvements or greater lease flexibility to attract tenants.
Asking rates also varied by property subtype. Office Service space commanded the highest average blended rate, at $11.70 per square foot NNN, followed by Manufacturing at $10.07 and Warehouse/Distribution at $7.84.
Development remains concentrated
The region had approximately 6.8 million square feet of industrial space under construction at the end of the third quarter, up slightly from 6.7 million square feet in the previous quarter.
A significant portion of that pipeline is tied to Amazon’s 3.6-million-square-foot Project Nova build-to-suit development in Eagan. Build-to-suit projects collectively accounted for 4.9 million square feet of construction, limiting the amount of speculative development in the overall pipeline.
Outside Project Nova, development remains selective, although speculative construction has increased in the Northwest submarket. Projects include Rogers Gateway, a 117,100-square-foot facility developed by Oppidan; Rogers 101 Business Park, a two-building, 442,000-square-foot project developed by CP West; and the 157,080-square-foot Arbor Ridge Business Center in Maple Grove, developed by Altus.
Third-quarter deliveries totaled 271,000 square feet, of which 254,084 square feet was occupied at completion. That level of preleasing and occupancy helped limit immediate supply pressure, although upcoming deliveries in the Northwest could create additional competition.
Investors return to the market
Industrial investment activity strengthened during the quarter. Sales volume reached $742 million, up from $410.7 million in the second quarter. Rolling four-quarter sales volume climbed to $2 billion, supported by several large institutional transactions and portfolio sales.
Among the quarter’s significant transactions, an Amazon-occupied property in Lakeville sold for $94.8 million. Arbor Lakes Business Park V and VI in Maple Grove traded for $74.15 million, while Imagine Print Solutions in Shakopee sold for $54.13 million.
Colliers reported that investor demand remains strongest for well-located, fully leased properties with durable tenancy and modern industrial functionality. Large vacant buildings, upcoming lease expirations and properties requiring significant capital investment face greater scrutiny from buyers.
