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Three Factors Driving Industrial Tenant Decisions (Part 3)

Wurth Adams, an industrial components distributor, occupied a new 146,000 sf facility in Brooklyn Park in late 2015.

By Mark Sims and Noam Newman, Industrial Brokers

The Twin Cities industrial market has been among the strongest drivers of commercial real estate growth in the most recent economic cycle.

In fact, since the beginning of 2011, nearly 15 million square feet (sf) of multitenant industrial space has been absorbed throughout the Minneapolis-St. Paul market, according to Cushman & Wakefield’s Compass report. That number – which doesn’t include the several massive, recent build-to-suit projects accommodating only one tenant – makes up more than 14 percent of today’s multitenant universe.

With growth continuing at a frenzied pace, and the fight for labor getting more intense than ever, leasing has become competitive for both landlords and the companies using space. So what factors are attracting users to the most successful properties, and how can landlords leverage those factors?

This is the third and final part of a blog series digging into recent trends in occupier decision-making.

Factor Three: The marketing edge  

Industrial real estate decisions don’t always come down to tangible factors such as location or cheapest rent. Sometimes it’s about what you can’t measure quantitatively – exposure, visibility, top-rate amenities or workplace morale.

Companies who fit that profile are most likely to want a property – be it brand-new, built-to-suit or relatively new but unoccupied – that checks all the boxes they’re looking to fill. More often than not, those companies put a strong emphasis on providing a high-quality environment for their workforce, locating in a key, visible spot or achieving the “wow!” factor with their real estate. And not uncommonly, companies are looking to do all three.

The Twin Cities market has seen a long list of companies upgrade from older, less-functional facilities to these “wow!” buildings. To name just a few, Star Exhibits, Milestone AV, Nilfisk and Wurth Adams have all left buildings in already solid locations to create their own work environment and footprint in other markets, often nearby.

Many of these users will inevitably be pushed to the parts of the metro where the most workers are, as well as those emerging as strong, well-amenitized industrial corridors. An example of an area that meets both these needs in Brooklyn Park, particularly the Highway 610 corridor, where plenty of new industrial properties have joined new retail and a new 610 connection to Interstate 94, creating strong headwinds for new industrial and manufacturing development. In many of our studies for clients, we’ve found a strong labor pool in Brooklyn Park, as well as nearby St. Michael, Albertville and Rogers, among other cities.

Sometimes, users after visibility and high-quality real estate will look to where land is plentiful. That’s been the case for several years in Shakopee, where users such as Shutterfly, Milestone AV, Bayer CropScience and many more have chosen to construct new, high-profile buildings rather than save a few dollars by occupying existing real estate. In each case, those users were after similar things – strong amenities, a strong workplace experience, and when possible, a good location for their workers.

Of course, building the most efficient and high-profile property possible will cost more, but users who are looking to make a splash – be it with their employees or potential customers nearby – are showing that they’re not afraid of the extra investment, especially if it means improved operations.

Mark Sims

Noam Newman

Mark Sims and Noam Newman are industrial brokers in Cushman & Wakefield’s Minneapolis-St. Paul office. The two are part of a team specializing in industrial landlord and tenant representation, property sales and consulting. Visit their site at http://smn-repartners.com.

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