MARKET INSIGHT POST

Forte Principal, Phil Simonet, provides insight to the Twin Cities industrial market report recently released by MNCAR/REDI.

The Minneapolis/St. Paul industrial market remains active and healthy however, the statistics demonstrate a bit of moderation on new lease transactions as market velocity has tapered a bit from 2022.  Total absorption for Q4 2023 totaled 1.083 million square feet and YE 2023 totaled 4.231 million square feet.  This compares to Q4 2022 net absorption 1.210 million square and YE 2022 totaled 6.064 million square feet.  Overall vacancy rate for YE 2023 was 4.9% compared to 3.4% YE 2022.

During 2023 9.1 million square feet of new projects were delivered compared to 6.0 million square feet delivered during 2022.  The delivery of new spec development depresses the net absorption to a certain degree, so even with higher vacancy rates and lower net absorption of space the market remains relatively healthy.  With the increase in interest rates and volatility of CAP rates we anticipate significantly less spec construction in 2024.  Areas that remain under scrutiny include Woodbury/Lake Elmo with over a million square feet of spec space and Cottage Grove with almost a million square feet of vacant new spec space. 

Q4-2023 Minneapolis-St. Paul Industrial Market Update

ECONOMIC OVERVIEW:

According to the Bureau of Labor Statistics (BLS), the unemployment rate for the Mpls-St Paul metropolitan statistical area (MSA) decreased 50 basis points to 1.9% for November 2023 from 2.4% for November 2022. The unemployment rate for the US was at 3.7% in November 2023 increasing 10 basis points from last year. State of Minnesota unemployment rate was 3.1%. The Mpls-St Paul MSA saw an increase in job growth but industrial specific jobs decreased in job growth in manufacturing by 1,200 during the same period.

MPLS-ST. PAUL AREA EMPLOYMENT STATS:

MARKET OVERVIEW:

The Mpls-St Paul industrial market consists of 289.1 msf in eight counties across the metro. Overall, there was 1.08 msf of positive absorption for Q4 2023 and bringing the YTD to 4.23 msf positive absorption. Multi-tenant only properties posted 406,500 sf positive absorption bringing the YTD to 2.13 msf positive absorption. The overall vacancy rate for the quarter was 4.9%, with multi-tenant vacancy at 7.6%. To date, there are 31 construction projects throughout the market totaling 4.7 msf and 51 properties have been delivered this year with 9.1 msf.

MARKET HIGHLIGHTS:

At the close of Q4 2023, the market experienced 2.6 msf of leasing activity in 175 transactions. The Northeast market showed the lowest vacancy rate of 2.6% while the Southeast market is at the top with 7.1% for all properties. The Northwest bested all markets with 875,800 sf positive absorption led by the new delivery of 500,000 sf for Graco. The Southwest market posted the most negative absorption of (1,800) sf led by Amazon vacating 162,000 sf. Ninety five properties sold totaling 4.1 msf for $393.7 million.

MARKET STATISTICS BY PROPERTY TYPE

Multi and Single Tenant:

VACANCY RATES BY MARKET

Multi and Single Tenant:

LEASE RATES BY MARKET

Multi and Single Tenant NNN:

MARKET STATISTICS BY PROPERTY TYPE

Multi Tenant:

NEW DEVELOPMENTS BY MARKET:

YEAR-TO-DATE DELIVERIES BY MARKET:

MARKET MAP:

 Q4-2023 Industrial Market Report is created by Minnesota Commercial Real Estate Association. For more information, you can reach them at: www.mncar.org

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