MARKET INSIGHT POST
Q1-2023 Minneapolis-St. Paul Industrial Market Update
Once again, the Twin City industrial market proved resilient with a strong first quarter of activity. Net absorption for Q1 2023 was 1,050,738 with an overall market vacancy rate of 3.8%. In comparison, Q4, 2022 net absorption was 1,210,144 square feet and the year-end overall industrial vacancy rate was 3.5%. While the vacancy rate experienced a slight increase, market fundamentals remain strong with excellent leasing activity in most submarkets, particularly 24’ clear and above buildings. Net rental rates continue to show impressive strength with year over year increases of 7.3% for office space and 12.46% for warehouse space. The exception to the overall positive industrial performance is the weakest industrial product type, office showroom which experienced negative net absorption of 125,348 square feet and a current vacancy rate of 6.7%. As expected, heavier finish industrial space has been far more negatively impacted from COVID-19 with little improvement anticipated over the balance of 2023.
New construction remains robust with 8.5 million square feet under construction in the pipeline. Rising interest rates appear to be impacting future spec developments as the cost of financing, lender underwriting and exit CAP rates have made it more difficult and riskier to continue the last several years of record breaking new/spec development. The first signs of moderation in spec develop is the recent shortened timeframe when ordering tilt-up concrete panels-clearly a sign of less demand by developers.
There are potential head winds that may impact the performance of the Twin City industrial market including the uncertainty of the US economy as demonstrated by the Q1 2023 GDP of only 1.1%, the potential reality of another banking/credit crisis set about by rising interest rates, poor internal bank management and ineffective federal regulator oversite, and finally the continued worker shortage restraining business growth across many sectors of the economy.
Q1-2023 Minneapolis-St. Paul Industrial Market Update
MARKET RECAP:
Total Inventory: 279,416,932 sf
Total # of Buildings: 3,210
Absorption: 1,050,738 sf
Vacancy: 3.8%
Asking Rate Low: $7.58 NNN
Asking Rate High: $11.00 NNN
Under Construction: 8,546,518 sf
Multi-Tenant Properties
Total Inventory: 147,980,030 sf
Total # of Buildings: 1,809
Absorption: 489,646
Vacancy: 5.9%
Asking Rate Low: $7.57
Asking Rate High: $11.08
ECONOMIC OVERVIEW:
MPLS-ST. PAUL AREA EMPLOYMENT STATS:
MARKET OVERVIEW:
MARKET HIGHLIGHTS:
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:
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