2015.09.02 EDC Packet - Laserfiche WebLink

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AUGUST 2015 1 INDUSTRIAL ' Over 1.2 Million Square Feet (4- z: iii Absorbed as the Industrial Market's Strong Pace Continues VACANCY AND ABSORPTION TRENDS The vacancy rate in the Minneapolis -St. Paul Industrial market was down slightly to 8.4 percent in MARKET INDICATORS the Second Quarter of 2015. Absorption was 626,624 square feet bringing the year-to-date total 02 2015 to 1,238,812 square feet. During the Second Quarter, over 1.4 million square feet of new industrial space was added to the market. 635,064 square feet of this space was in single -tenant VACANCY ♦ developments for Room & Board and Btu Dot at Gateway North Business Center in Otsego. The NET ABSORPTION .' rest of the space added was in the following speculative developments: RENTAL RATE ♦ NAME CITY SUBMARKET DEVELOPER SF Red Rock Building Maple Grove West/Northwest United Properties 319,062 Dayton Distribution Center I Dayton West/Northwest Liberty Property Trust 247,004 Highcrest Distribution Center Roseville Minneapolis North Meritex 130,000 Shakopee Industrial Center II Shakopee Southwest Capp Industries 121,000 VACANCY 20% Bunzl Distribution absorbed 155,000 square feet at Red Rock Industrial Building in June, while the rest of the 817,066 square feet of multi -tenant space came on to the market vacant. The addition ,s% 131%12 s% 11.5% 10.5% 10.4% of this space to the market kept the vacancy rate from decreasing more than slightly, in spite of Z 10% 8 6 b 9.4% — 8 Z r✓ steady absorption. a There are few large users in the market for 100,000 square feet or more and landlords at the 0 multiple new bulk developments are competing heavily for those tenants. Polaris signed a lease for 2007 2008 2009 2010 2011 2012 2013 2014 oz 850,000 square feet of space at Canterbury Distribution Center in Shakopee, which was formerly a Kmart distribution center. Other large tenants have chosen to build their own facilities; forgoing the process of customizing an existing building to meet specific corporate goals. These trends may NET ABSORPTION result in longer -than -expected leasing time at new bulk multi -tenant buildings. 3.000,000 2,011,292 In some submarkets, including the Southwest, we have seen a slight decrease in the probability of 2,000,000 1.410,063 1369 692 1677707 1,261,325 1,238,812 a tenant renewing in their current space. This is likely due to an overall improvement in the a0 ,,000,000 94877 economy, allowing tenant's to re-engage their growth plans, causing the need for larger leased LL n,000,000) premises, as opposed to trying the leverage a better deal in their existing spaces. to (928,872) (2,000,000) (3,000,000) (2.430,461) We are seeing strong activity among office showroom space users, especially in the southern 2007 2008 2009 2010 2011 2012 2013 2014 2015 submarkets. Concessions are decreasing for this property type, especially at well -located, YTD functional properties. Also in demand across all submarkets are owner -user buildings where there is low supply and strong demand.