As of the end of 2017, the Minneapolis-St. Paul industrial market had enjoyed 30 straight quarters of positive net absorption. And the best news? Officials with the Twin Cities office of CBRE don’t expect the industrial sector here to slow down anytime soon.
CBRE reported that the Twin Cities industrial market absorbed 892,780 square feet of space during the fourth quarter of last year. This means it has now been more than seven years since net absorption in this sector was below zero.
CBRE says that a growing number of industrial tenants are modernizing and upgrading from their current locations into newly completed buildings, a big reason for the activity in the industrial sector. The company pointed to MyPillow as an example. MyPillow last year moved into 172,836 square feet in Gateway South, a new industrial development in Shakopee, Minnesota. This move consolidated MyPillow’s operations into a more functional facility. CBRE says other companies are making similar moves throughout the market.
A total of 10 new industrial facilities opened in the fourth quarter, adding 1.3 million square feet of space to the Twin Cities market. Half of these projects were build-to-suit developments, according to CBRE. The remaining five new developments were spec construction, and accounted for nearly 1 million square feet of the new industrial space in the quarter.
And these spec spaces aren’t remaining empty for long. CBRE reported that spec deliveries in the quarter were 68 percent leased upon completion.
Gateway South in Shakopee, developed by Duke Realty, was the largest building added to the Twin Cities’ industrial inventory, at 374,700 square feet. Launch Park Phase 1 in Lakeville, Minnesota, by Launch Properties was the second biggest completion of the fourth quarter, adding 286,000 square feet. Hyde Development’s Northern Stacks project added two new developments, buildings IV and V, totaling a combined 296,000 square feet of warehouse space.
Despite the new construction, industrial vacancy rates remained steady at 4.2 percent at the end of the fourth quarter. That matches the third quarter of 2017 for the lowest levels of the year.
