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CBRE <br />MARKETVIEW MINNEAPOLIS/ST. PAUL INDUSTRIAL <br />MARKET OVERVIEW CONT'D <br />Direct availability rates for multi -tenant product <br />dropped 50 basis points from the previous quarter, <br />finishing Q1 2016 at 9.9%. Average net rental rates <br />continued to trend upwards in Q1 2016 to $5.57 <br />per sq. ft. largely due to higher rates being attained <br />for newly constructed product. <br />ABSORPTION <br />Absorption figures are expected to remain strong <br />and above the pre -recession average following the <br />4 million sq. ft. absorbed in 2015, which is the <br />highest yearly total since 2005. Q1 2016 totaled <br />633,840 sq. ft. of positive net absorption. Likely <br />the largest move -in for 2016 will follow the <br />completion of a 820,000-sq.-ft. BTS in Shakopee. <br />Similar in size to the lease signed by Polaris in <br />2015, the bulk warehouse is located within the <br />same city and Southwest submarket. That <br />submarket as well as the Northwest, both known <br />for their favorable environment for industrial <br />users, contributed 80% of the positive absorption <br />for the market in Q1 2016. <br />The largest move -in of Q1 2016 was Murphy <br />Warehouse Co. occupying the remaining 200,000 <br />sq. ft. of the 1.1 million-sq.-ft. warehouse that <br />Polaris occupied in 2015. The former Kmart <br />facility at 901 Canterbury Dr had been vacant since <br />2013 other than multiple short term leases in <br />Figure 2: Top Lease Transactions <br />the space. The largest move -out was Nilfisk <br />vacating approximately 240,000 sq. ft. in <br />Plymouth for their newly constructed building in <br />Brooklyn Park. <br />The robust activity and demand seen over the <br />past few quarters in the Minneapolis/St. Paul <br />industrial market, particularly for light industrial <br />space, is largely a result of distribution users <br />looking to manage matters from the evolution of <br />e-commerce. Demand for the bulk warehouse <br />product type is at an all-time high accounting for <br />nearly 87% of total net absorption in Q1 2016 <br />among the three product types reported on by <br />CBRE Research. <br />Figure 3: Multi -tenant Absorption by Product Type <br />SF (Thousands) <br />1,000 <br />800 <br />600 <br />400 <br />200 <br />0 <br />(200) <br />N CZ) ti r\ N N <br />0 o ti o0 00 0 <br />• Bulk Warehouse • Office Warehouse • Office Showroom <br />Source: CBRE Research, Ql 2016 <br />Tenant Size (Sq. Ft.) <br />Address Transaction Type <br />Star Exhibits <br />200,800 NE of 93rd and Hampshire Ave New Lease <br />Murphy Warehouse <br />199,278 <br />901 Canterbury Rd <br />New Lease <br />Data Recognition Corp <br />185,500 <br />7300 Northland Dr N Renewal <br />Ruan Transportation 156,000 <br />19401 Rogers Rd New Lease <br />Confidential Construction Manufacturing Client 118,185 <br />11601 93rd Ave N Renewal <br />Cafe Imports 63,411 <br />2280 W Walnut St New Lease <br />Source: CBRE Research, Ql 2016 <br />Q1 2016 CBRE Research <br />© 2016 CBRE, Inc. I 2 <br />