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CBRE <br />MARKETVIEW MINN <br />EAPOLIS/ST. PAUL INDUSTRIAL <br />CONSTRUCTION <br />The majority of new development to hit the market <br />in early 2016 will be BTS, though multiple spec <br />projects will soon pick up steam after a moderate <br />winter. Most of the construction activity is from <br />existing users in the market looking to expand their <br />footprint in Minnesota, as well as leverage their <br />perceived importance by the state to its overall <br />economy. Job and other development programs <br />providing business incentives to users to stay in the <br />state, like the Minnesota Job Creation Fund (JCF), <br />have been an influential factor in recent <br />construction. Created in 2014, the program <br />continues to gain participation and spur growth in <br />the Minneapolis/St. Paul industrial market. Most <br />recently was the state's promise to provide a grant to <br />Wagner SprayTech for their planned 220,000-sq.-ft. <br />distribution center in Otsego. <br />The concerns of potential oversupply of new spec <br />product is proving unwarranted as the availability of <br />new construction built since 2014 has dropped 30% <br />over the past quarter. <br />Figure 4: Top Sale Transactions <br />Since Q3 2014, the Minneapolis/St. Paul industrial <br />market has experienced development <br />incomparable to any cycle in recent history. <br />Approximately 8.2 million sq. ft. of new product <br />has hit the market since that time, 56% of which is <br />BTS. <br />INVESTORS <br />Following a record year in 2015 for industrial sale <br />volume in the Minneapolis/St. Paul industrial <br />market, sale volume was relatively slow in Q1 <br />2016. Sale activity is expected to increase in Q2 <br />with several offerings in the market. For the first <br />time since 2013, we expect to see an increase in <br />Class A industrial sales for both existing product <br />and new construction that is now 100% leased. <br />The new supply will result in new pricing <br />benchmarks to be set due to pent up demand for <br />core industrial offerings in Minneapolis/St. Paul. <br />Property Buyer <br />Sale Price / Size (Sq. Ft.) City Transaction Type <br />7217-7309 W 27th St <br />8401 Jefferson Hwy N <br />Global Securitization Services LLC S22.8 M/ 213,512 <br />Saint Louis Park <br />Maple Grove <br />Investment Sale <br />Broadway Business Center Interstate Development <br />S7.8 M /154,811 Minneapolis <br />Investment Sale <br />Mendota Heights Business Center UPREIT <br />S7.5 M/ 78,564 Mendota Heights Investment Sale <br />5155 & 5201 River Rd E Hoyt Properties <br />S6.6 M/ 125,000 Fridley Investment Sale <br />Source: CBRE Research, Q1 2016. <br />Q1 2016 CBRE Research © 2016 CBRE, Inc. I 3 <br />