Apartment Vacancies Spike In Downtown Minneapolis
Downtown Minneapolis has been ground zero for developers of new apartments in recent years. But by the end of March, there were 695 vacant apartment units sitting empty there – enough to fill two larger apartment towers.
Minneapolis-based Marquette Advisors reports a vacancy rate of 8.8 percent for downtown Minneapolis at the end of the first quarter in its latest “Apartment Trends” report. That’s up from a vacancy rate of 5 percent during the same time in 2014. By comparison, the apartment vacancy rate in downtown St. Paul was 4.1 percent in Q1 of 2015.
The high vacancy rate may give developers pause because it’s notably higher than 5 percent, generally considered the equilibrium point between landlords and tenants. When vacancy rates climb above five percent, it’s considered to be a market that favors tenants. In those situations, landlords may offer a month of free rent or other concessions to draw renters to their buildings.
Meanwhile, there are several additional apartment buildings still in the development pipeline for downtown. The Marquette Advisors report notes that another 866 new units are expected to open yet this year.
For the full year, Marquette Advisors is forecasting that about 3,100 new apartments will open across the Twin Cities. By the end of 2015, that means that more than 10,000 new apartment units will have been completed between 2013 and 2015 across the metro.
But in the big picture, apartment vacancy appears to be holding steady. The report finds a vacancy rate of 2.7 percent across the MSP area at the end of the first quarter, unchanged from a year ago.
Downtown Minneapolis is also the most expensive area in the metro to rent an apartment. Average rent downtown costs $1,493 per month, an uptick of 6.8 percent from a year ago. Across the region, Marquette Advisors reported the average apartment rent stands at $1,018 per month.
In another new but separate study, San Francisco-based Apartment List – an apartment search web site – found that over the last year, rental growth in the Twin Cities area is outpacing the national average. According to Apartment List, local rents grew by 4.2 percent, compared to 2.5 percent nationally.
On Monday, the Metropolitan Council released new population estimates showing that as of April, the population of the 7-county metro area has grown 4.5 percent, adding 127,878 new residents since the 2010 census. According to the Met Council, the population of the core metro area is now 2.98 million people.
The Met Council’s numbers show that 34,982 new local housing units have been added since the 2010 census.
The city of Minneapolis grew by 7.5 percent according to the new numbers, adding 28,708 new residents to bring its population to 411,286. Many of those new additions are living in apartment units.
Per the Met Council’s report: “Preliminary estimates show that growth is occurring in all parts of the region. Urban communities are growing because of new multi-family developments, such as apartments and condominiums, while suburban communities are more likely to be growing because of new single-family homes and townhomes. Two communities with the highest rate of growth, Wayzata and Lilydale, grew primarily because of new senior living communities.”