Emerging Industrial Markets: Minneapolis
September 14, 2022
DemographicsMore than 5 million people live within 100 miles of Minneapolis, 23% of which are in the important 18-34 range. Within 250 miles, occupiers can reach nearly 12 million consumers.
Figure 1: Minneapolis, MN Population Analysis
Source: CBRE Location Intelligence
Figure 2: Minneapolis, MN Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics
Over the past five years, there have been 97 economic incentive deals totaling nearly $80 million at an average of $11,031 per new job in the Minneapolis metropolitan area, as reported by WAVTEQ.
According to CBRE’s Location Incentives Group, among the top incentive programs available to companies locating in the Metro Minneapolis area is the Minnesota Job Creation Fund (MJCF), which provides up to $1 million in a cash grant over a five-year period. In order to qualify, companies must create or retain high-paying jobs and invest at least $500,000 in property improvements. In select cases, companies could receive up to $2 million in funding if at least 250 jobs are created and $75 million in capital is invested.
Another incentive program available in Metro Minneapolis is the Minnesota Investment Fund (MIF), which provides financial assistance to businesses focused in the industrial, manufacturing and technology industries. In order to improve economic vitality statewide, up to $1 million in loan financing is provided to companies that add new workers and retain high-quality jobs in Minnesota. Loan forgiveness may occur if the company achieves certain capital expenditure, job and wage requirements.
Figure 3: Top Incentive Programs
Source: CBRE Location Incentives Group
Note: The extent of state and local incentive offerings depends on location and scope of the operation.
Minneapolis and St. Paul, Minnesota’s capital, are the two major cities that make up the Twin Cities region. The region is served by the I-35, I-90 and I-94 interstate highways. Interstate 90, stretching 276 miles along the southern portion of Minnesota, is one of the most heavily traveled east-to-west transcontinental thoroughfares spanning 3,000 miles and running through 13 U.S. states. Minnesota has 21 railroad companies, including four Class I major railroads comprised of the BNSF, CN, CP and UP rail lines stretching over 3,500 miles of track. The inland Port of Minneapolis provides access to the Mississippi and Minnesota rivers. The port has a diverse manufacturing community that produces metal components, electronic equipment, plastics, auto parts, high-tech products and food processing, among many others.
Two main airports facilitate cargo transport in the region. Minneapolis-Saint Paul International Airport (MSP) is within a 10 mile radius of both downtowns and contributes $15.9 billion each year to the Twin Cities’ economy. It handled approximately 1.1 billion pounds of air cargo in 2021, up 4.3% from the previous year.* Rochester International Airport (RST) handled nearly 82 million pounds of air cargo in 2021, up 17.6% from 2020.* RST has more than 330,000 sq. ft. of cargo ramp space, with another 730,000 sq. ft. of building and ramp space planned.
Supply & Demand
The Minneapolis industrial market—13th-largest in the country—totals 346 million sq. ft. and is comprised of eight submarkets. Net absorption in Q2 totaled 1.7 million sq. ft., with just under 1 million sq. ft. in the Northwest submarket. The vacancy rate fell by 50 basis points in H1 2022 to 4.1%.
More than 30% of the market’s industrial inventory is in the 100,000-to-250,000-sq. ft. size range. Leasing activity totaled 2.7 million sq. ft. in Q2 and was strongest in the South Central and Northwest submarkets. Construction activity totaled 5.8 million sq. ft., 54% of it preleased. Most of this construction activity is in the Northwest and East submarkets.
Occupiers in the transportation/distribution and manufacturing sectors accounted for 28% and 27% of Q2 leasing activity, respectively. Overall average net asking rent increased by 1.2% to $6.56 per sq. ft., with the 76.2 million-sq.-ft. Northwest submarket recording the largest average at $7.13.
Manufacturing is predicted to remain the region’s primary industry. With its vast connectivity to major commercial shipping capabilities in the air freight, trucking and rail industries as well as abundant economic incentives, Minneapolis is well-positioned for industrial occupier and investor opportunities.
Figure 4: Minneapolis, MN Historical Data
Source: CBRE Research, Q2 2022.
Figure 5: Minneapolis, MN Size Range Comparison
Source: CBRE Research, Q2 2022.