Expansion or Efficiency? What Industrial Tenants Should Prioritize in Their Next Lease

By Chris Rohrer, Broker & Pete Kostroski, Broker | Rokos Advisors

Industrial tenants across the Twin Cities are facing a new kind of decision. After years of rapid growth and tight supply, the market is finally stabilizing — but that stability is coming with pressure to rethink strategy. For some businesses, the focus is shifting from expansion to efficiency, while others see the current environment as their best chance to secure long-term space for growth. The challenge lies in knowing which move creates the greater advantage.

The Market Has Shifted — and So Have Priorities

For much of the last five years, industrial expansion was the default move. E-commerce growth, reshoring, and strong logistics demand fueled a wave of leasing activity across the metro. Vacancy rates hovered near record lows, and tenants took what they could get — often paying premiums just to secure square footage.

Now, with vacancy creeping upward and new supply entering select corridors, tenants have leverage again. But the strategy has to be clear: Is your business better served by locking in growth capacity or optimizing what you already occupy?

When Expansion Makes Sense

Expansion still plays a critical role for companies with growth trajectories or space inefficiencies that limit operations. Larger footprints can improve workflow, increase production capacity, or allow for future headcount.

Expansion makes the most sense when:

  • Utilization is maxed out. Productivity or safety is being limited by current space constraints.

  • Long-term growth is predictable. Demand, contracts, or headcount justify a larger footprint for 5+ years.

  • Adjacent space or nearby availability exists. Expanding within the same building or park can reduce disruption and moving costs.

  • Landlords are flexible. Current conditions may allow tenants to negotiate favorable expansion rights or phased growth options.

The key is to grow strategically — not emotionally. Expansion without clear ROI can tie up capital and reduce flexibility if the market softens.

When Efficiency Creates More Value

For many tenants, optimizing existing space delivers greater returns than adding more of it. Efficiency strategies might include reconfiguring layouts, consolidating locations, or renegotiating underutilized areas. With rents still high and construction costs elevated, making the most of your footprint often wins out.

Efficiency should be prioritized when:

  • Utilization is inconsistent. Some areas are overused while others sit idle.

  • Workforce models are evolving. Automation or hybrid operations are changing space needs.

  • Operating costs are rising. Reducing square footage or renegotiating lease terms can stabilize expenses.

  • Relocation doesn’t make financial sense. Build-outs, downtime, and logistics may outweigh potential savings elsewhere.

Tenants choosing efficiency over expansion often unlock cash flow and flexibility — both valuable in a market that’s normalizing after years of growth.

The Data Behind the Decision

Across the Twin Cities, industrial vacancy is averaging around 4-5%, with new construction still commanding premium rents. Warehouse users continue to seek scale, while flex users look for efficiency and better proximity to the workforce. The balance between the two depends on how much future uncertainty your business can tolerate.

When comparing expansion and efficiency scenarios, smart tenants analyze total occupancy cost per unit of output, not just per square foot. A slightly higher rent can be justified if it supports greater productivity or retention, while an oversized footprint with underutilized space can quietly drain resources.


The best lease strategy isn’t one-size-fits-all. Expansion can unlock growth and positioning power, but efficiency can strengthen margins and resilience. The key is understanding which outcome supports your long-term business plan — and negotiating your lease to match it.

Ready to rethink your footprint? Connect with Rokos Advisors today to evaluate whether expansion or efficiency creates the most value for your next move.

Contact Rokos

Rokos Advisors is an award-winning Minneapolis - St. Paul based commercial real estate/tenant representation firm specializing in helping businesses find the perfect office or industrial space for their company.

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Warehouse vs. Flex: Where Are Industrial Tenants Finding the Best Value?