Industrial Market Shows No Sign of Slowing at Midpoint of 2018
Vacancy and Absorption Trends
Industrial product is continuing to gain strength in the commercial real estate market in Minneapolis-St. Paul, with vacancy rates at historical lows and a strong construction pipeline of new deliveries in the first half of 2018. There was 905,000 square feet of positive absorption in the second quarter, which marks the eighth straight quarter of positive absorption in the Twin Cities market. Year to date, there has been 1,180,000 square feet of absorption, which brings the direct vacancy rate of multi-tenant buildings to an all-time low of 6.34%.
The two largest swings in occupancy can be attributed to new construction at 610 Commerce Center II and North Park Business Center II, both of which are in Brooklyn Park in the West/Northwest submarket. The West/Northwest has been one of the most active submarkets for new construction due to the availability of land located close to major highways and in established industrial corridors, all of which are important criteria when selecting successful industrial sites for development.
In terms of largest leases signed, there was 300,000 square feet of new transactions completed in Q2, in addition to a number of large renewals. Large industrial deals like these have been completed in all tracked submarkets, suggesting there is both increasing demand and steady growth across the Twin Cities metro for industrial product.