IOS Market Deep Dive: Minneapolis–St. Paul, MN

Despite new industrial product delivering over the past several years, vacancy remains tight relative to historical norms. Leasing activity slowed across parts of the industrial market over the prior year, but momentum has recently improved, particularly for IOS users seeking functional infill locations.

TLDR

• Metro profile: Minneapolis–St. Paul remains a core Upper Midwest logistics and service hub, supported by steady population growth, a diversified employment base, and extensive transportation infrastructure.

• IOS lease economics: New IOS leases signed between 2023 and 2025 generally range from approximately $5,500 to $12,000+ per acre per month, with most deals clustering around $8,500 to $9,000 per acre per month.

• Typical site profile: Leases commonly involve ~10,000 SF of building improvements on roughly three-acre sites, favoring infill locations with highway access.

• Supply constraints: Limited infill land, fragmented municipal zoning, and growing redevelopment pressure continue to restrict new IOS supply across the metro.

• Market outlook: Leasing activity has begun to reaccelerate, sales inventory remains scarce, and pricing momentum is stabilizing or strengthening for well-located IOS assets.

Market Overview

The Minneapolis–St. Paul metropolitan area continues to function as one of the most important industrial, logistics, and service-oriented hubs in the Upper Midwest. Long-term population growth, a diversified economic base, and sustained infrastructure investment have reinforced the region’s position as a critical operating center for construction, utilities, fleet-based services, and distribution users.

The Twin Cities benefit from a highly connected transportation network anchored by I-94, I-35, I-494, and I-694, along with direct access to Minneapolis–St. Paul International Airport. This infrastructure allows operators to efficiently serve both local and regional markets, with direct truck routes connecting Minneapolis to Chicago, Milwaukee, Kansas City, and the Dakotas. In addition, river and rail systems expand freight optionality across the broader Midwest.

Despite new industrial product delivering over the past several years, vacancy remains tight relative to historical norms. Leasing activity slowed across parts of the industrial market over the prior year, but momentum has recently improved, particularly for IOS users seeking functional infill locations. Brokers active in the market note that transaction velocity has picked up in recent months, while pricing is beginning to revisit, and in some cases exceed, levels last seen during the 2022 peak.

Tenant demand is most concentrated inside the I-494 and I-694 loop, where available IOS inventory is limited. Equipment rental groups, construction companies, and building material suppliers continue to drive leasing activity, typically targeting sites between two and five acres that offer immediate highway access and efficient layouts.

Owner-users have also re-entered the market in a meaningful way. Many are seeking long-term control over operationally critical properties that support fleet routing, equipment staging, and service coverage across the metro. While speculative IOS development remains uncommon, properly zoned and well-configured sites continue to attract strong interest when they become available.

IOS Market Fundamentals

Minneapolis–St. Paul is best described as a structurally constrained IOS market. Infill land suitable for outdoor storage is scarce, zoning standards vary widely across municipalities, and entitlement processes can be time-consuming and unpredictable. Each city within the nine-county metro maintains its own planning framework, adding complexity for both investors and tenants attempting to secure or reposition IOS sites.

Despite these challenges, demand fundamentals remain durable. IOS users across construction, utilities, environmental services, telecom, transportation, and equipment rental rely on outdoor storage as a core component of daily operations. Proximity to population centers and highways remains a top priority, and those characteristics are increasingly difficult to replicate as redevelopment pressure intensifies.

Sales inventory remains particularly tight. Market participants continue to report limited availability of clean, functional infill sites, with competition intensifying for properties that are not encumbered by environmental issues, functional obsolescence, or zoning uncertainty. As a result, pricing has stabilized and is beginning to trend upward again, supported by both investor and owner-user demand.

Supply-side friction remains the dominant theme. Environmental constraints, entitlement risk, and redevelopment forces have reduced the number of viable IOS sites across the metro. While off-market transactions continue to occur, the overall pool of available inventory remains shallow, reinforcing pricing discipline.

Planning Policy and Redevelopment Pressure

Local planning policy further reinforces long-term IOS scarcity. Within Minneapolis proper, the Minneapolis 2040 Comprehensive Plan introduces stricter standards for outdoor storage uses, particularly near the riverfront. Properties located within the Mississippi Corridor Critical Area overlay are not prohibited from IOS use, but they face heightened requirements related to screening, visibility, stormwater management, and discretionary approvals.

In practice, these regulations increase both cost and entitlement risk for new or expanded IOS operations. Over time, this framework limits new supply while enhancing the relative value of existing, compliant sites that already meet zoning and operational standards.

Bottom Line

Minneapolis–St. Paul remains a tight and supply-constrained IOS market. Limited entitled land, fragmented zoning, and ongoing redevelopment pressure continue to restrict new inventory, while leasing momentum and renewed sales activity support stable rents and improving pricing for functional infill sites. For investors and operators focused on well-located IOS assets, the Twin Cities offer scarcity-driven value backed by durable, long-term demand fundamentals.

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