The Minneapolis industrial market saw 1 million square feet of positive net absorption during Q1 of 2019, resulting in the vacancy rate decreasing slightly to 4.3 percent, according to a new report by CBRE.
A major factor in the positive net absorption was the completion of four projects totaling 424,218 square feet, with the largest portion of the positive absorption taking place in the South Central submarket, which saw vacancy reduced to 3.9 percent from 4.2 percent quarter-over-quarter. Currently, there are 12 projects under construction totaling 2.1 million square feet, with seven projects scheduled to break ground in 2019.
“The consistent and growing demand for industrial properties continues to fuel a high number of construction projects throughout the Twin Cities,” said Dan Swartz, senior vice president with CBRE. “Tenants also continue to have unique specifications and requirements, as 86 percent of the seven projects ready to break ground are build-to-suit projects.” Leasing remained strong with 2.6 million square feet recorded in Q1, with the Northwest submarket having the highest portion at 27 percent, followed by the Southwest at 22 percent and South Central at 16 percent. New leases were slightly ahead of renewals with 52.4 percent of all leasing activity and tenants favoring warehouse and distribution buildings the most, accounting for 1.9 million out of the 2.6 million square feet leased.
Portfolio sales also saw high activity, as the highest total consideration was for Class A bulk warehouses with less than 10 percent finished office space, with all other portfolios consisting of standard office warehouse product with office finish below 25 percent, industrial tech product at more than 50 percent finish and Class B vintage buildings with low clear height. All these factors trend towards a market favoring investment.
