The Minneapolis warehouse/ distribution space market is showing ongoing improvement in both occupancy and rents. The vacancy rate fell 20 basis points in the second quarter to 12.5% on 344,000 square feet of net absorption, and is down 40 from a year earlier. The rate fell 10 basis points in July to 12.4%. For the second consecutive quarter the average asking rent rose 0.4% and the average effective rent increased 0.6%, reaching $5.69 psf and $4.93 psf at mid-year. The effective average increased a penny in July.
New supply is picking up. The 126,000-square-foot Bridgepoint Business Park Phase I completed construction in South St. Paul in May, and the 120,000-square-foot FedEx Truck Facility is expected to complete construction in Roseville in October. Three warehouse/distribution projects with a total of 733,000 square feet broke ground during the second quarter, and 686,000 square feet are expected to complete construction next year. The vacancy rate is forecast to remain close to 12.0%, as rents rise 2.5% to 3.5% per year, according to the Reis forecast.
The relatively large 57.5-million-square-foot Minneapolis Flex/R&D space market is also picking up, as 105,000 square feet of second quarter net absorption pushed the vacancy rate down 20 basis points to 16.9%, and another 101,000 in July, brought it to 16.8%. It is expected to go no lower by the end of 2012 despite limited new supply. The average asking rent increased 0.1% during the second quarter to $7.70 psf, with the average effective rent up 0.3% to $6.66 psf. The effective average increased a penny in July, and gains of 1.8% asking and 2.0% effective are forecast for all for 2012. The vacancy rate is expected to continue falling slowly, but remain above 16.0%, while rent gains stay close to 3.0% starting in 2013.
The most absorption since 2007 helped push down the vacancy rate to 14.7%, the lowest rate since 2008 according to Cushman & Wakefield. However “rental rates remain flat at $4.37 psf.”