Nearly 6 Mil SF of Industrial Space Up for Grabs in Twin Cities

MINNEAPOLIS-There is up to 6 million sf of Twin Cities industrial space up for sale and more will likely hit the market soon, according to industrial brokers. Behind the disposition is the difficulty REITs are having raising money in the capital markets and a trend by some big industrial REITs toward a more focused approach as to what type of property they want to hold, says Eric Bjelland, vice president of investment services for Bloomington-based United Properties.

Among the big sellers of property is Chicago-based First Industrial Realty Trust, which has placed 1.3 million sf of bulk-warehouse and manufacturing space and 600,000 sf of office-showroom space on the market. Indianapolis-based Duke-Weeks Realty Corp. has put up for sale about 1 million sf of office-warehouse space, and Des Moines-based Principal Financial is selling 600,000 sf of office-showroom space.

“We usually sell about 3 million sf to 4 million sf each year,” Bjelland says. “But we’ve already sold 2 million sf this year, so if everything gets sold, it will be the biggest year in three to four years, maybe longer.”

That’s a big ‘if,’ however. Bjelland thinks that all the big REITs will end up having to split up their offerings into smaller groupings, since the market for this space will likely be smaller local investors.

“REITs are looking to redeploy their capital into higher yielding investments, like development,” Bjelland says. “Also, they are having difficulty raising money on Wall Street, as investors are out of real estate and into different areas. So they are selling non-core assets, and each of them have a different definition of core assets.”

First Industrial, for example, has its eye on maintaining a diversified industrial portfolio, and is selling off pieces of real estate that don’t fit. Duke-Weeks, meanwhile, wants to hold on to property that does not require a lot of management or capital, such as buildings with high ceilings and few tenants. “Over time in the Twin Cities they have bought a lot of product that doesn’t meet their new national strategy, such as much of the old R.L. Johnson site they bought when came here three years ago,” Bjelland says.

Meanwhile, AMB is looking to focus on warehouses that allow for freight-forwarding, just-in-time inventory and will concentrate on those types of warehouses near airports in major markets. That means they will likely sell off the bulk of the 5 million sf they own in the Twin Cities, because most of what AMB has in the Twin Cities has nothing to do with that strategy, Bjelland notes.