Industrial properties in the Midwest are not supposed to be hot commodities—so why is one of the biggest real estate deals in the country for a package of industrial sites?

On June 22, Blackstone Real Estate Partners VII, based in New York, finalized its deal to buy the Central U.S. portfolio from Australia’s Dexus Properties Group for $770 million. The deal consists of 65 industrial properties, including three large, recently-completed class-A distribution facilities leased to Whirlpool Corporation.

The transaction represents the biggest single industrial real estate portfolio sale in the US in 2012, according to the Dexus. The deal also continues a run of industrial acquisitions by Blackstone, which is also reportedly also pursuing the CalWest portfolio of 95 industrial properties valued at $2.1 billion, now owned by troubled Chicago-based Walton Street Capital. Blackstone has raised more than $6 billion for its new fund, according to Reuters.

Since 2010, occupancies had improved at the properties from 79 percent to 90 percent prior to the sale, according to Dexus, which credits the “active approach” of its U.S. management team for the improvement, though the recovering U.S. industrial economy certainly helped.

Most of these properties are located in the Midwest. “The sale of the Central U.S. portfolio is in accordance with our strategy to exit non-core US markets,” said Darren Steinberg, CEO of Dexus, in a statement. Blackstone apparently feels differently.

The sale leaves Dexus still holding a significant portfolio of industrial properties, representing about 7 percent of the firm’s total assets. Dexus now owns and manages 24 U.S. industrial properties totaling more than 6.8 million sq. ft. and valued at approximately $550 million. The company’s remaining industrial properties consist of high-quality industrial properties concentrated in the West Coast market. Dexus also manages properties valued at approximately $200 million on behalf of U.S. third-party clients. “These are highly attractive markets, with high levels of demand from tenants, strong market fundamentals and good revenue prospects,” added Steinberg.

More deals for industrial properties

The market for industrial properties has recovered steadily over the last two years. Nationwide, the average vacancy rate fell to 13.3 percent in the first quarter 2012, down from its high of 14.5 percent in 2010. Industrial production has also risen steadily since the recession, almost but not quite reaching pre-recession levels, according to data from the Federal Reserve.

Sales of significant industrial properties totaled $1.9 billion in April, up 17 percent from the year before, according to the latest report from data-firm Real Capital Analytics, based in New York. But despite the increased demand for properties, prices have risen only a little, with average cost per sq. ft. only slightly over $50—roughly where prices have been for past two years. Average capitalization rates, which represent operating income as a percentage of the property’s sales price, remain just below 8 percent, down from close to 9 percent during the recession. That’s a small change compared to the falling cap rates for other property types.