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Industrial Real Estate on the Rise in the Twin Cities

June 3, 2014
Twin_CIties_Real_Estate

Industrial Real Estate is in high demand in the Twin Cities.

Real estate firms in the Minneapolis-St. Paul region are reporting that many companies are in need of more manufacturing and distribution space. It won’t be easy to come by.

An improving economy, combined with a lack of inventory, has caused a drastic increase in real estate development. Developers are currently involved with build-to-suit projects and renovations on existing sites. They’ve also constructing speculative buildings with no immediate tenants. A spokesman at Colliers International said that he expects anywhere from 6 to 12 speculative industrial buildings to be constructed this year.

The Federal Reserve Bank of Minneapolis reported that Minnesota construction as a whole is increasing. Last year, construction and land development loans increased by 6.8 percent – accounting for nearly 2 billion dollars.

Last week, First Industrial Realty Trust bought two sites in the Brooklyn Park area. The 2.6 million dollar purchase equated to more than 15 acres of land. First Industrial has two separate buildings planned for the property, totaling 240,000 square feet.

Chris Hickok, an executive vice president at Jones Lang LaSalle’s Twin City office, said that it’s not just an improving economy that is causing the uptick in construction.

“I think a lot of what’s driving this is that the existing stock of buildings is pretty thin,” Hickok said. “Companies that can’t find existing buildings are being forced to look at new construction.”

The overall vacancy rate for warehouses and office space has decreased drastically within the last year – from 10 percent in 2013 to 8.7 percent in the first quarter of 2014.

The heaviest demands for real estate lie along the highway, especially within the Interstate 494-694 loop. It also increases value if there is a local labor force and access to public transit. Having courier services in close proximity is also a plus.

As a result of these demands, developers are renovating warehouses in good locations that are functionally obsolete. One such project is taking place at the former Smurfit-Stone Container Corp. site in Roseville. The warehouse is being renovated to meet more modern demands from perspective tenants.  It’s an “urban-style redevelopment in a suburban location,” according to Todd Hanson.

Out-of-town real estate developers have also begun moving into the Twin Cities market, purchasing existing properties in order to cash in on the increasing demands of the area.

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