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IS IT THE “AMAZON EFFECT”???

The Amazon Effect

The Twin Cities industrial real estate market is HOT!
Is it the “Amazon Effect”?

Amazon’s 24-hour delivery promise requires them to lease multiple, dispersed, and well-located distribution centers. This, in turn, is driving up building values and rents all over the country.  Case in point, two recent owner/user building sales. First, a 31,000 square foot building in Mendota Heights sold for $86.69 per square foot, and second, a 63,000 square foot building sold for $88.91 per square foot. Just a few short years ago, these would have been sold for $70.00-$75.00 per square foot. Winning the lottery would be great, but it seems like owning a 10,000 to 60,000 square foot industrial building anywhere in the Twin Cities (especially in the 494/694 loop) is the next best thing.
Funny thing happens when building values go up…rents go up, too. Multi-tenant landlords throughout the City are pushing up rates by $0.25-$0.45 per square foot and, for renewals, they are not accepting rents below the last lease rate in effect for the lease.
All of these factors are now fueling a resurgence of sale/lease backs. Recently, two sale/lease back transactions had sale prices 20% over the normal market price with seller’s signing ten-year leases. This put cash in the seller’s pocket to fuel business growth and provided much needed investments to Opportunity Zone or 1031 exchange investors. “Amazon Effect” or not, building values are climbing with no end in sight…for now.
~Written by John Young, CCIM | Vice President

Contact Paramount for a Building Valuation,
Lease Review or Market Update
(952) 854-8290

Paramount’s InSite Newsletter | June 2018

Check out the June 2018 edition of Paramount’s Insite Newsletter. 
CLICK HERE.
You will find interesting articles related to Property Management, find out if your space helps or hurts your hiring efforts, read about a recent transaction with Warners’ Stellian, and check out upcoming events around the Twin Cities.

Call Paramount for all your 
commercial real estate needs today.
(952) 854-8290
www.paramountre.com