- At 2.7%, the vacancy rate edged upward slightly but is still one of the lowest in the country; 47 of the 53 local submarkets tracked reported vacancy rates of 3.5% or lower
- Increasing rents may push some renters into homeownership
- The development boom continues; developers are ramping up to deliver 3,000 to 4,000 units in 2013
- While demand for new units continued to outpace new construction, absorption slowed
- Institutional investors are selling older properties and partnering with developers on new projects
Despite the more than 1,400 new apartment units delivered in the Twin Cities in 2012, the multi-family vacancy rate edged up only slightly to 2.7%, from 2.3% one year ago, reported Marquette Advisors. It is the third-lowest vacancy rate in the country, according to Reis Inc., which reports a national average vacancy rate of 4.6%. Twin Cities’ vacancies peaked at 7.3% in 2009.
Most new construction occurred in Minneapolis; in highest demand is urban in-fill development near mass transit, employment and attractive retail and entertainment options. Despite new product, the Minneapolis vacancy rate held its own at 1.6%, up just 0.1% from one year earlier. The downtown Minneapolis vacancy rate is also tight at 1.7%, and Southwest Minneapolis, including Uptown, is 1.6%.
Both urban and suburban properties boasted strong renter demand. Forty-seven of the 54 submarkets tracked reported vacancy rates of 3.5% or lower. Downtown St. Paul’s vacancy is 2.8%, Bloomington is at 2.3%, and Eagan is at 2%. Vacancy rates were lowest for studio and one-bedroom units at 2.2% and 2.4%, respectively.
The average monthly rent increased to $951, up 2.8% from one year earlier. Downtown Minneapolis reported average rents of $1,257 while Southwest Minneapolis is $899. The effective rent (rent paid after any discounts) is $939. Many new properties’ asking rents are in the $2-psf-per-month range, which translates into $2,000 for a 1,000-sf unit; this is a new threshold. These rates on new properties are giving existing landlords an opportunity to push rents and still be the less-expensive option.
To read more, visit the January 2013 edition of Cushman & Wakefield/NorthMarq’s Compass report, now available online. Visit the web site: www.northmarqcompass.com