Setting Records Again: Apartment Sales Continue Strong
It’s still a “landlord’s market” in Minneapolis — that’s good news for investors, but how long will it continue?
The Continuing Apartment Boom
The apartment building boom that began in 2010 has not abated. With about 6,500 new units slated for completion by the end of 2017, and another 14,000 that are in various stages of planning and development across the Twin Cities, demand continues high and the vacancy rate remains low. For five years, the rate has been below three percent, and was at 2.7 percent for the second quarter of 2016. Although there has been some lag in the downtown area, which has been the city’s hot spot for years, first and second ring suburbs continue to be active.
Outperforming Other Cities
Compared to other markets, the Twin Cities are outperforming cities nationwide, with lower vacancy rates and a more moderate rate of rent increase. In some local areas, where the current market is said to exhibit initial signs of saturation, some concessions are being offered by apartment managers, according to Jennifer Gordon, senior vice president for the Excelsior Group. But downtown Minneapolis, Uptown and East Town, she says, remain healthy, and new projects are leasing on or ahead of schedule. Perhaps the only worrisome aspect of the local rental market, say some analysts, is the dearth of affordable apartments in downtown and in popular suburbs.
The Numbers Don’t Lie
At the end of last year, the lowest vacancy rates were seen in Minneapolis’ eastern and southern suburbs, as reported by the Minneapolis StarTribune, with the weakest market in downtown St. Paul, with a vacancy rate of 7.3 percent.
CBRE Senior Vice President Abe Appert terms the Twin Cities “the darling of the investment community,” adding that 2016, with an expected $1.2 billion in apartment sales, topped the previous year’s record by at least 20 percent.
Major national investors have discovered Minneapolis and St. Paul, and some of the new construction and renovation is driven by out-of-state investors. However, there is still ample room for smaller and individual investors, according to analysts. Some of the more popular renovations and apartment conversions involve historic homes and commercial buildings, and the consensus is that that segment of the local market will continue to be strong.
