Minneapolis-St. Paul industrial market report
Q2 2024
The Minneapolis – St. Paul industrial market has shown signs of stabilization, maintaining a vacancy rate of 5.6% for three consecutive periods from the fourth quarter of 2023 through the first half of 2024. Despite this consistency, leasing activity has continued to soften, as landlords and tenants proceed cautiously in the current economic environment. Among tenants actively leasing space, demand for spaces 150,000 square feet (sf) or larger has dwindled YTD in 2024 as leases under 150,000 sf accounted for approximately 86% of all industrial leases, a 22% greater share of leasing compared to 2023.
86%
Industrial leases primarily under 150,000 sf
Throughout the first half of 2024, approximately 86% of all industrial leases were 150,000 sf or less, a substantial proportional increase from the 64% share in 2023. The MSP industrial market has seen tenant demand decline for spaces 150,000 sf or larger through the first half of 2024, after seeing a growing share of leasing activity in this size tranche over the prior 5 years. YTD in 2024, leases under 20,000 sf have seen increased demand, accounting for 30% of all industrial leases, approximately twice the volume seen in 2021-2023.
75%
Under construction inventory declines
Under construction inventory has declined by 75% from the near-record level development pipeline of 8.7 msf recorded in Q2 2023. The development pipeline has decreased by 75% from the 8.7msf recorded in Q2 2023, down to 2.1 msf currently under development. The Minneapolis – St. Paul industrial market experienced substantial deliveries throughout 2023, substantially reducing the amount of space anticipated to deliver in 2024.
1.5 msf
MSP leasing activity slows
Leasing activity in MSP has declined steadily since spiking in the second quarter of 2023 at 4.2 msf. Just 1.5 msf was leased in the second quarter of 2024, a 63% year-over-year decline.
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