2015.09.02 EDC Packet - Laserfiche WebLink

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MARKET REPORT I AUGUST 2015 1 INDUSTRIAL I MINNEAPOLIS -ST. PAUL OFFICE SPACE WORKPLACE DESIGN TRENDS LEAKING INTO INDUSTRIAL MARKET On the horizon for industrial space use are features that follow trends seen in the office market, many of which allow for flexibility in the future use of the space to reduce the potential for obsolescence. Higher parking counts, more windows for natural light and sustainable designs are key. All types of business owners are evaluating the need for collaborative spaces that include functionality and provide amenities for workers. FUTURE TRENDS This spring it was announced that Amazon.com plans to invest $220M in Shakopee to build an 820,000 square foot distribution center. The undeveloped site is on the southwest corner of Shenandoah Drive and Highway 101, about a half -mile north of Canterbury Park. Amazon acquired the site from United Properties and is scheduled to open the facility in the fall of 2016. Amazon also plans to lease a separate building in Shakopee, the 162,000 -square -foot Minnesota Valley Distribution (10� 65i�Y MINNEAPOLIS WEST/NORTHWEST NORTH .55,E (69J 00 11, C� 5 .wpb ST. PAUL ��y1 r,Iqim.�i EAST SOUTHWEST f "", AIRPORT/ SOUTH OF v THE RIVER ,.^� 155; titttte Q2 ABSORPTION 400,000— 258,379 200,000 75,473 1 211,11t N — a 0 lu (19,874) LLN (200,000) (400,000) Airport/ Mirvteapdis Southwest St. Paul West/ South North East Northwest of the River AIRPORT/SOUTH OF THE RIVER Center I, for use as a sorting center. The presence of Amazon in Shakopee continues the transition from a city mostly known for its theme park and race track, into one of the state's biggest clusters of technology companies. Construction costs will continue to be a challenge as demand for materials and workers for other regional projects including the new Vikings stadium lengthens timelines and increases costs. While this is challenging for developers and builders, it makes for high replacement costs which helps keep sale prices up at existing buildings. We expect vacancy to remain flat over coming quarters as additional speculative space is delivered to the market. While the new space may not lease as quickly as expected, the long-term viability of the industrial market remains strong and the appeal of this area as a Midwestern distribution hub will continue to attract new tenants and prompt expansion of existing industrial businesses. Submarket Highlights The vacancy rate in the Airport/South of the River submarket is 8.6 percent, down from 9.2 percent at Quarter One. Activity was steady as absorption was 75,473 square feet for the quarter bringing the year-to- date total to 124,704. The submarket absorbed 377,258 square feet in all of 2014. The Airport/South of the River Submarket is the smallest of the submarkets we track and construction is not as active as in the West/ Northwest or Southwest submarkets, but demand has remained steady and development is occurring. COLLIERS INTERNATIONAL I MINNEAPOLIS -ST. PAUL Q2 VACANCY 20 15 _ 10% 8.6% 8.9% 10 0 7.1% 7.0% 5 0 Airport/ Minneapolis Southwest St. Paul West/ South North East Northwest of the River Scannell Properties is planning South Logistics Park on 176 acres in Lakeville. The site has easy access to 1-35 and is located next to several buildings Setzer Properties is building for FedEx Freight. Uponor North America began construction on an expansion to their existing manufacturing facility in Apple Valley. The project will include a total of 88,000 square feet of both renovation and expansion space to accommodate both manufacturing and office space.