A huge industrial lease just signed in Rogers will fill the biggest vacancy in the Twin Cities but create an even bigger hole in Brooklyn Park.
Meanwhile, another large lease will fill the seventh and last building in the Northern Stacks industrial park in Fridley.
Print industry supplies distributor Veritiv confirmed on Friday that it signed a lease this week with Indianapolis-based Scannell Properties for the 335,400-square-foot Wilfred Distribution Center at 13201 Wilfred Lane N. in Rogers. The building was once a Walgreens distribution center.
The Scannell-Veritiv deal is the biggest industrial lease signed in the Twin Cities in the past 18 months, according to a news release from the Minneapolis office of CBRE. That period goes back to a third-quarter 2016 lease Distribution Alternatives signed with United Properties for 402,000 square feet of space in Lino Lakes.
Scannell paid $10.87 million for the Wilfred Avenue property last May, according to Finance & Commerce records.
The deal, in turn, will create the largest industrial vacancy in the Twin Cities, said Matt Oelschlager, a CBRE first vice president who represented Scannell in the deal. Veritiv is moving out of 382,635 square feet in its current space at 9001 Wyoming Ave. N. in Brooklyn Park. John Ryden and Mike Bowen of CBRE also represented Scannell.
The Wilfred Avenue property had been the largest industrial vacancy in the metro, Oelschlager said.
But for Rogers, the lease is a sign that the market is finally tightening after the industrial construction boom in recent years. The northwest submarket – of which Rogers is a part — had 1.2 million square feet of vacant space six months ago. That could drop to less than 500,000 square feet by summer, Oelschlager said.
“Every part of town feels pretty healthy, with Rogers being the asterisk,” he said in an interview on Friday. “But activity and demand in Rogers has been frothy in the past 90 days.”
The industrial vacancy rate in the combined Rogers-Dayton submarket was 33.8 percent at the end of 2017, according to the latest industrial research and forecast report from the Minneapolis office of Colliers International. The overall vacancy rate for industrial space in the Twin Cities was 6.6 percent.
Spec construction – particularly in the suburb of Rogers — is what boosted the northwest industrial vacancy rate in the first place, Finance & Commerce reported previously.
Atlanta, Georgia-based Veritiv, which has more than 170 warehouses nationwide, is making the move ahead of the June expiration of its lease in Brooklyn Park, said Kristie Madara, a spokeswoman for the company. Veritiv periodically “reevaluates” its leases and in this case chose to move to Rogers. About 100 employees will relocate to the new facility.
Scannell has made some improvements to the building, including adding new dock equipment and repaving the parking lots.
Veritiv was formed in 2014 as a merger between print industry distributors Unisource Worldwide and Xpedx, Madara said.
In Fridley, Northern Stacks developers Hyde Development and M.A. Mortenson Co. will see auto parts distributor LKQ Corp. move in early next year.
Chicago-based LKQ will lease a planned 200,000-square-foot building in the 1.65 million-square-foot park. LKQ will move out of 75,000 square feet at 3621 Marshall St. NE in St. Anthony, and will bring about 100 employees to Fridley, said Jason Simek, a Colliers vice president who represented Hyde Development and Mortenson. LKQ signed the 10-year lease late last week. Eric Batiza with Colliers also represented the Northern Stacks landlords.
Construction on the new building is expected to start this spring and finish in early 2019, Simek said. With that building leased, Northern Stacks has three vacant spaces remaining – the entirety of the 120,000-square-foot Northern Stacks VI building, 62,000 square feet in Northern Stacks V, and 12,000 square feet in a historic building called the Boiler Room.
LKQ will not only get more square footage, but also will have more height for storage. Ceiling heights in the new building will be 32 feet. The company’s current building is 18 feet high, according to CoStar.
“They’re going to be able to store a lot more product in a lot less space,” Simek said Friday.
Northern Stacks is in the Minneapolis north submarket, according to the Colliers report. The vacancy rate in that submarket was 5.2 percent at the end of 2017.