By Joe Mahoney, Opus
In today’s industrial landscape, where some U.S. metros are grappling with double-digit vacancies and an oversupply of speculative product, the Minneapolis-St. Paul metropolitan area continues to stand apart.
With consistently strong fundamentals, measured development, disciplined absorption and diverse demand, the Twin Cities have historically avoided the peaks and valleys of fluctuating supply and demand that plague other cities. Looking at current data, during the first two quarters of 2025, industrial vacancies here hovered around 4 percent while the national average was 9.3 percent, according to CBRE. In fact, the Twin Cities have the fifth lowest industrial vacancy rate in the country.
Steadfast economics
This stability is no accident. The Twin Cities of Minneapolis and St. Paul rank as the 13th largest industrial market in the country due to a number of factors.
Among the most impactful, they have a robust corporate base that includes 17 Fortune 500 companies in industries ranging from manufacturing, technology, agriculture and healthcare to medtech, energy, retail and financial services. This diversity helps drive consistent demand.
In addition, above-average wages that outpace inflation, below-average unemployment rates and above-average job growth, household resiliency and demographic stability together help make Minnesota a good place to work.
For developers, these factors translate into a stable consumer base and a productive workforce that supports both manufacturing and distribution, which, in turn, justifies new investment.
Deliberate, disciplined
But the Minneapolis-St. Paul industrial market also benefits from discipline. It has been built on the shoulders of developers who are careful not to overextend. New projects rarely move forward until supply and demand are balanced and financing is in place.
This discipline shows up in the current construction pipeline: nearly two-thirds of the 3.5 million square feet under construction is build-to-suit, which means tenants are already lined up. Speculative projects make up the balance, but those are carefully timed and strategically located. And of that 3.5 million square feet, just 1.5 million is scheduled to deliver yet this year, preventing the oversupply that hampers other markets.
That restraint pairs well with the current flight to quality, as users actively seek out modern space. Tenants are moving out of older, less functional buildings in favor of higher ceiling heights, better dock ratios, more efficient layouts and the overall amenities that Class A developments offer. As a result, new deliveries often lease up quickly.
Availability illustrates the point. At present, just two new construction metro properties offer 300,000 square feet or more of vacancy — one in Woodbury and the other in Shakopee. Though similar in size, they represent very different submarkets, buildings and prospective users. The Woodbury property, for instance, is cross docked, while Shakopee’s
River Valley Business Park is not, potentially opening it up to a wider pool of prospective tenants.
Further illustrating the metro’s balanced supply and demand: in the first half of this year, 2 million square feet of new industrial construction was delivered in the market, and 2 million square feet were absorbed, a sign that even as new supply hits the market, users are consistently stepping in to take it.
Broad leasing activity
This balance is seen not only in absorption but also in the range of leasing activity. In the first half of the year, deals spanned everything from a large deal in excess of 500,000 square feet to a number of smaller deals under 50,000 square feet. The majority of industrial leases were 100,000 square feet or smaller.
And interest remains strong. Already in the third quarter another 500,000-square-foot lease was signed. And signed leases are expected in a number of Class A developments before the end of the year, including one at Johnny Cake Business Center in Apple Valley and another at Dayton Parkway Business Center in Dayton.
More good news is that activity and interest is strong across Minneapolis-St. Paul’s submarkets. The Northwest continues to lead with more than two-thirds of first-half 2025 leasing, followed by the Southwest at 13 percent and the Southeast at 11 percent. Even the slower South Central submarket saw steady movement, further demonstrating that demand is metro wide.
With steady leasing activity and lower vacancy rates across all industrial submarkets, rents are growing, which is helping to offset higher construction and financing costs. Right now, the market-wide average asking rent is $9.87 per square foot. As rents increase, developer and investor confidence increases, and speculative development increases.
Built for resilience
Taken together, these dynamics make the Minneapolis-St. Paul market a steady performer. It absorbs what it builds, maintains healthy demand across submarkets and avoids the pitfalls of overbuilding. That stability makes the Twin Cities one of the most reliable industrial markets in the country.
For developers, the current environment is about balancing discipline with opportunity: underwriting projects carefully, navigating city approvals strategically and listening closely to tenant requests for design and functionality. That hands-on approach is what has long kept the Twin Cities market resilient — and what will continue to set it apart in the years ahead.
Joe Mahoney is senior director of real estate development with Opus. This article originally appeared in the September 2025 issue of Heartland Real Estate Business magazine.