Why is the multifamily market such a hot one in the Twin Cities? Marcus & Millichap points to the jobs market here. According to the company’s most recent apartment research, the abundance of employment opportunities is attracting job seekers to the Minneapolis/St. Paul area.
And when these job hunters get here? Many of them want to live in apartment buildings in the heart of the city’s urban areas, which explains the multifamily construction boom still taking place in the Twin Cities.
Don’t expect apartment construction to slow soon. Marcus & Millichap says that major employers such as UnitedHealth Group and Amazon plan to hire hundreds of workers during the next several months. As more residents stream to the Twin Cities in search of these jobs, apartment vacancies throughout the metropolitan area should fall, even as developers are expected to add thousands of apartment units to the area throughout 2015.
This is all good news for owners. Marcus & Millichap reports that the demand for apartments is causing rents to soar. The company says that apartment rents during this year have seen their largest climb in seven years.
To no one’s surprise, the downtown Minneapolis area is seeing the most new apartment projects, followed by the area around the University of Minnesota. But developers aren’t neglecting the suburbs, with Marcus & Millichap predicting that they will add more than 2,000 units to the Twin Cities’ suburbs during 2015.
The raw numbers tell an impressive story:
Construction: Marcus & Millichap says that apartment completions reached their highest peak since 2000 during 2014, when 6,100 apartments were brought into service. In 2015, construction slowed, but only by a bit. Developers are expected to add a total of 4,800 new apartment units this year.
Vacancies: Marcus & Millichap reports that the multifamily vacancy rate will fall to 2.5 percent by the end of 2015. That’s down 20 basis points for the year. Net absorption will reach 5,200 units. In 2014, the apartment vacancy rate fell 50 basis points.
Rents: Marcus & Millichap reported that effective apartment rents will rise an average of 4.8 percent to $1,098 a month during 2015. This increase comes after last year’s gain of 3.1 percent.