- 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.
The 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: www.northmarqcompass.com