Apartment rental trends have been relatively strong and steady in the Twin Cities and across the nation since 2016, according to the latest statistics compiled by RentCafe, but the numbers were last updated in February. However, new construction in Minneapolis has lowered average rents.
That's good news, according to analysts, and "a breath of fresh air" in a market that has seen rapidly increasing prices over the past five years. A corresponding decrease in affordability in a market that sorely needs housing for a growing labor market has been worrisome for the past several years. In fact, the city has recently taken steps to promote more affordable apartments by approving residential towers in former height-restricted neighborhoods, and by reversing long-standing single-family zoning rules in the city.
Median rents were lower by 8% and 13%, respectively, for one- and two-bedroom apartments between 2019 and 2020, according to recently reported figures. Additionally, there are some national trends that may prove interesting for local apartment managers and developers.
Surveying National Trends for Apartment Housing
Kingsley Associates and the National Multi-family Housing Council (NMHC) recently released its 2020 Apartment Resident Preference Report, detailing input from nearly 375,000 renters in more than 5,300 communities across the country. Some trends may be a little surprising.
Kingsley Principal John Falco noted that the information can be of great help to property managers and leasing agents who seek to boost renter experience, as well as to architects, designers and builders planning new communities and renovations of existing housing.
Much of the new apartment stock in Minneapolis over the past several years is the result of ongoing renovation and rehabilitation of existing buildings in the urban core, Uptown, and neighborhoods adjacent to the University of Minnesota campus. The planned high-rise apartment building currently under construction in Dinkytown is testimony to the city's position as a leader in "ahead of the curve" thinking about long-term affordability for students and young professionals.
Here are the nationwide trends that are gaining prominence, according to the NMHC report:
Phone and Internet Connectivity
Reliable cell reception and high-speed internet, whether within a private apartment, or in public space—even at the pool or in the workout room—seem to be at the top of the list for most apartment dwellers. Telecommuting, virtual communication and working from home will not disappear even as the nation's workforce gets back to work, according to experts. At least 90% of those who responded cited connectivity as a priority consideration, and the requirement for seamless, fast, reliable connectivity is not expected to change in the years ahead.
The apartment perks that most interest today's renters are all technology-driven. Does that surprise anyone? Nearly three-quarters of those surveyed report wanting smart-home features that make life easier, and also save them money. Thermostats, smart lighting and smart locks are favored features in individual rental units, along with building security, parking and other lifestyle amenities.
Virtual and Voice Assistants
Renters also want to have a little fun when they're at home. Approximately 43% reported that they were very interested in a virtual, voice-activated assistant, and some even went so far as saying that they would not rent a space that did not include support for such an application.
On-site Business Centers vs. Co-working Space
The new normal may be in the direction of at least a partial work-from-home schedule for most people. For a majority of apartment dwellers, a designated workspace, complete with office tools and shared desks and business tools, would be a desirable amenity. Even with the growing popularity of co-working spaces, only 15% of respondents reported ever using one, while nearly 55% said they'd be interested in an on-site business center in their apartment building. Whether for efficiency or a change of pace, this is an amenity that apartment developers might want to consider in new buildings.
Renters Love Their Pets
Approximately one third of survey respondents reported owning a pet, most commonly a dog, and noted that they are perfectly willing to pay not only a pet deposit, but a higher rate for pet amenities such as a dog park, pet washing station or on-site pet services. Depending on the location, a monthly fee considered reasonable ranged from $28 and $34 additional per service per month.
The rise of short-term rentals nationally is a positive in the eyes of most apartment dwellers. Only 16% of survey respondents had a negative view of such short-term availability within a community. Although the term might vary—from a single semester at college to a six-week training commitment with a major company—there seems to be a demand for flexibility, with the understanding that a one-year or even a six-month lease term is no longer the norm.
Although once touted by developers as a viable option to reduce housing costs, the trend toward co-living arrangements seems to have gone flat around the nation. Even Millennials, who once embraced the idea of sharing larger space with other like-minded tenants, have cooled on the idea. Nearly 70% of those surveyed reported that they would not be interested in such arrangements at the present time.
Recapping the Minneapolis Data
While national trends are interesting, it is the Minneapolis data that is enlightening. Based on the most recent data, average rent for an apartment in the city is $1,588, with the average size at 786 square feet. A one-bedroom unit is typically closer to the average than other floor plans, including studios up to three-bedroom units. The year-over-year increase in average rental rate was just 3%.
Thirty-eight percent of apartments in Minneapolis rent in the range of $1,001 to $1,500 per month, while 26% rent between $1,501 and $2,000. Nineteen percent rent for more than $2,000, while 16% have rates between $701 and $1,000. Renter-occupied households in Minneapolis represent 55% of the total.
Finally, since 2016, the rental rates in the city have hovered just below or just above the $1,500 mark, with a slight but steady increase from quarter to quarter. Minneapolis rental rates are consistently just higher than the national average, and it is the most expensive large-city market in Minnesota. Average rent in St. Paul is $1,303, but the average in St. Louis Park is $1,609. Average rent in Edina is $1,502, with the average in Eden Prairie tabulated at $1,521.
That fact that remains at the forefront of all forecasts is that occupancy rates remain high in the Twin Cities, and more apartment housing is still needed.