Sperry Van Ness International Corporation’s (SVNIC) 2015 Market Update Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2015. Today we are delving into the 2015 Top Industrial Markets to Watch. Not the largest or the most actively contested markets, the 2015 Industrial Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.
Top Industrial Market to Watch: Minneapolis – St. Paul, MN
Minneapolis in 2015 is a clear buy in the investor calculus. According to the Urban Land Institute’s 2015 Emerging Trends Report surveys, the Twin Cities ranks fourth in the nation for the strength of the industrial investment opportunity, behind the Southern California agglomeration of the Inland Empire, Los Angeles, and Orange County. Two-thirds of survey respondents ranked Minneapolis-St. Paul’s industrial sector as a buy this year. Another 28% rated the market a hold. Less than 6% gave the market a sell rating; only Orange County and Raleigh-Durham had a more favorable assessment. Investors can still find less relative bargains in this less aggressively priced market. Cap rates in the Minneapolis region averaging 6.8% during 2014, 100 to 150 basis points higher than other top-ranked markets.
The Twin Cities has long served as a vital economic hub for the Upper Midwest region. Distribution centers, logistics facilities, and data centers — some with elite Tier III certification, including the new CenturyLink MP2 facility — are popping up throughout the metropolitan area to match strengthening absorption. More than a million square feet of new space entered the inventory in early 2015, including nearly 500,000 square feet for furniture retailer Room & Board. The vacancy rate declined to below 7% in any case. More than 4 million square feet of projects are currently in the pipeline, representing roughly 3% of the existing inventory. While the bulk of that space is speculative, the market’s strong underlying growth drivers are expected to support healthy absorption.
To read more on Minneapolis – St. Paul and other top industrial markets, download the full version of the 2015 Industrial Market Update report here.
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