Landlords Start to Benefit from Improving Industrial Market Conditions, Though Some Tenants Remain Cautious

  • Market continues to tighten for functional space
  • Vacancy rate of 12.8% is the lowest vacancy since 2008; market posted the most positive absorption since pre-recession 2005
  • Market sees a “flight to quality” as tenants seek more modern, efficient buildings
  • Landlords are gaining some pricing power on functional space, but aggressive rates and incentives are still on the negotiating table for less-functional buildings

The Twin Cities multi-tenant industrial market appears to be at a “tipping point.” Vacancies are finally dropping, users continue seeking functional space in a tightening market, landlords are gaining some pricing power at quality properties, and free rent and other concessions are diminishing for prime space.

Compass_SubmarketMap_Industrial_600pxThe vacancy rate fell to 12.8%, a 3.3% reduction from 2011 and a significant drop from 16.4% in 2010. This marks the lowest vacancy rate since 2008. The Twin Cities industrial vacancy rate is higher than the U.S. industrial vacancy rate, which was 9% in third-quarter 2012, a drop from 10.1% one year earlier.

The Northwest is the tightest submarket at 12.1%, followed by the Southeast at 12.8%, the Northeast at 13%, and the Southwest at 13.5%. The Southwest boasted the market’s largest leases: ShopJimmy leased 240,000 square feet (sf) in Burnsville, and Southern Wine & Spirits leased 230,000 sf in Shakopee. Both tenants had very few options to meet their large space requirements.

Absorption totaled 2,512,348 sf feet in 2012—the most absorption since pre-recession 2005. Office/warehouse properties posted the most absorption with 1,260,090 sf followed by bulk/warehouse with 948,030 sf; office/showroom lagged with 304,228 sf.

To read more, visit the January 2013 edition of Cushman & Wakefield/NorthMarq’s Compass report, now available online.  Visit the web site:

About Cushman & Wakefield/NorthMarq

​Cushman & Wakefield/NorthMarq is a joint venture formed in September 2011 by NorthMarq Real Estate Services and the Minnesota operations of global real estate services firm Cushman & Wakefield. By combining the talent of both organizations at the regional level with the global platform of Cushman & Wakefield, we offer clients the best combination of regional strength and global capabilities. The result: the leading commercial real estate firm by all measures in the Upper Midwest.
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