According to a new report from real estate services firm Jones Lang LaSalle (JLL).
Online shopping, home improvement frenzies and delivery logistics have bolstered demand for industrial properties – both leased and owned, according to JLL’s fourth quarter U.S. industrial outlook report.
“The industrial market has been remarkably buoyant with vacancy remaining virtually unchanged given the turbulence of 2020. The disruptions caused by [coronavirus] the closings have had minimal impacts on tenant moves in this year, pushing net uptake to record highs,” said Mehtab Randhawa, director of US industrial research at JLL.
Industrial vacancy rates in the United States fell to 5.4% from 5.6% a year ago for the entire sector, which includes 13.7 billion square feet of leased and owned industrial properties.
US factory and warehouse leases in effect in the fourth quarter increased 26.9% from a year ago to 524 million square feet.
Rental rates remained high across the sector and landlords avoided the rent concessions that have become common in the retail and office sectors.
Although strong demand was generalized across all industrial real estate in 2020, the rise in online shopping, delivery and other e-commerce dominated industrial leasing in 2020, accounting for more than 16% of the whole sector.
“A staggering 327.2 million square feet of new supply was added to the industrial market this year. With continued demand from e-commerce and ‘logistics and distribution’ users on the rise, the pipeline shows no signs of slowing down. “, says the report. .
JLL Industrial Americas President Craig Meyer said the results came as a surprise.
“At the start of March 2020, there was a high degree of uncertainty about the impact of COVID-19 on the industry,” Meyer said. “Initially, we had expected demand to drop by up to 20%, but it soon became clear that online shopping was going to be much larger than expected. Overnight, we saw online sales increase by more than two and a half times compared to 2019.”
The industrial sector contrasted dramatically with the retail, office, hospitality and other markets. The office vacancy rate in the United States has risen from 12.9% to nearly 16%, according to recent data from real estate services firm Cushman & Wakefield.
Vacancy in the Twin Cities 186 million square foot factory and warehouse market was 6% last year, compared to 4.8% in 2019. The increase was mainly due to the addition of space newly built industrial sites that had not yet been occupied, said Carolyn Bates, research director of JLL’s Minneapolis office. New construction properties added more than 2.7 million square feet of industrial real estate to the Twin Cities market in 2020. That’s up from 2.1 million square feet in 2019, she said. declared.
The increase includes Bayport-based Andersen Windows, which completed the expansion of its 350,000 square foot factory in Cottage Grove late last year and Minneapolis-based Graco, which opened a campus addition of 500,000 square feet at Rogers. In November, Cirtec Medical announced it was expanding manufacturing to Brooklyn Park by leasing and rehabilitating an existing building.
Last fall, recently spun off 3M’s Kindeva Drug Delivery began construction of a 139,000 square foot plant and research lab in Woodbury. Lowe’s opened a plumbing distribution business in Maple Grove. And a DataBank data center is opening in Brooklyn Park. They all show the strength of the industry in the metro area, said Chris Hickok, who leads JLL’s industrial market division in Minnesota.
The Twin Cities industrial real estate sector has been active in other ways, including a surge in real estate purchases.
“The Minneapolis-St. Paul industrial market broke records in 2020, with more portfolio transactions than any other year in history,” Bates said, noting that cities also saw a higher share of transactions. portfolio and institutional capital than ever before.
The local industrial real estate market recorded a total transaction volume of $1.6 billion last year. Highlights include Blackstone’s record acquisition of CSM’s portfolio in the third quarter, as well as Prologis’ acquisition of Liberty Property Trust in the second quarter, according to the report.
Dee DePass • 612-673-7725