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CBRE <br />MARKETVIEW MINNEAPOLIS/ST. PAUL INDUSTRIAL <br />INVESTORS CONT'D <br />The highlight of the quarter was the industrial <br />portfolio sale by the Brennan Investment Group to <br />Bahrain -based GFH Financial Group for $125 <br />million The 26 property portfolio sale included <br />three R&D/Flex buildings totaling approximately <br />214,000 sq. ft. in Minneapolis. <br />THE INDUSTRIAL OUTLOOK <br />Though uncertainty on multiple fronts shadow the <br />industrial outlook with issues ranging from rising <br />minimum wages locally to financial turmoil <br />globally, the fundamentals remain strong for the <br />Minneapolis/St. Paul industrial market. <br />Rental growth will continue to increase towards <br />prerecession levels especially if demand for new, <br />Class A distribution space remains. Rents are <br />expected to increase 4% on average by the end of <br />2016 throughout the Minneapolis/St. Paul <br />industrial market. <br />Figure 5: The Reverse Logistics Process <br />Lill It iII1 III �11 <br />Customer <br />Returns <br />ABILITY TO CHASE DEMAND <br />Source: CBRE Research, 01 2016. <br />The effects of the widespread growth in <br />e-commerce in both primary and secondary <br />markets are still being observed and evaluated by <br />those concerned. For example, the 66% growth in <br />e-commerce sales in 2015 compared to 2010 <br />significantly increases the amount of good <br />returned by consumers. Because of this and other <br />new, unanticipated consumer preferences, <br />unforeseen issues evolve and call into question <br />previous assumptions. Such is the problem for <br />receiving and restocking returned items, now at an <br />all-time high. This concept, known as reverse <br />logistics, increases the importance for retailers to <br />improve logistics processes. Whether addressed by <br />users through an expanding footprint or <br />outsourcing these processes to 3PLs, new <br />consumer habits are continuing to reshape the <br />industrial real estate landscape and distribution <br />models nationally. <br />Q1 2016 CBRE Research <br />© 2016 CBRE, Inc. I 4 <br />