Demand Pushes Twin Cities’ Occupancy to Top

Although investor appetite is high, deliveries haven’t kept up with demand. Roughly 6,700 units were underway late last year, mostly targeting high-income residents.
Twin Cities rent evolution, click to enlarge
Twin Cities rent evolution, click to enlarge

The Twin Cities multifamily market remains one of the most vigorous in the region, as evidenced by steady employment gains and an increasing population. Although investor appetite is high, deliveries—especially for low-income renters—haven’t kept up with demand. One result is that the market boasts the highest occupancy rate among major U.S. metros, at 97.7 percent, enabling 3.9 percent year-over-year rent growth through November, well above the 2.5 percent national average.

Benefiting from a strong talent pool coming from prominent universities and a thriving health-care industry, the metro added 44,200 jobs in the 12 months ending in September, about one-third of which were in the education and health services sector. Apart from the $5.6 billion DMC initiative that broke ground on its first phase, Health Partners opened a $75 million Neuroscience Center in St. Paul. One of the largest infrastructure projects—the light-rail line linking downtown Minneapolis to Eden Prairie—will spur more opportunities for transit-oriented development, with authorities slated to begin work on the extension in 2018.

Roughly 6,700 units were underway as of November, mostly targeting high-income residents. This has put pressure on affordability, leading municipalities to step in by endorsing nonprofits to acquire Class B/C buildings in exchange for keeping rents low. The issue might escalate going forward, especially since investors are looking for old suburban stock that can be renovated into higher-rent housing.

Read the full Yardi Matrix report.