Strong Demand Augments Twin Cities Occupancy
The metro’s healthy economic growth, low unemployment rate and strong multifamily fundamentals continue to attract investors and developers to the region.
By Adina Marcut
Twin Cities rent evolution, click to enlarge
A strong job market has kept the economy on sound footing in Minneapolis–St. Paul, sustaining one of the lowest unemployment rates in the country, at 3.5 percent as of June. The healthy economy and strong multifamily fundamentals should continue to attract investors and developers to the metro.
The education and health services sector is leading growth, having added 20,000 jobs year-over-year through June. The area’s health-care industry—led by Fortune 500 companies that include powerhouse UnitedHealth Group, as well as St. Jude Medical, which Abbott recently acquired—is bound to remain a constant source of new employment. World-renowned Mayo Clinic is the anchor partner in the $5.6 billion Destination Medical Center project in Rochester. At the same time, the University of Minnesota and the University of St. Thomas enroll more than 60,000 students, feeding a deep talent pool.
Multifamily demand remains strong—especially for market-rate apartments—and has led to rising rental rates and the highest occupancy rate among major U.S. metros, at 97.7 percent as of July. However, the roughly 6,500 units slated to come online this year are bound to alleviate some of that demand in the short term. In the 12 months ending in July, rents in the metro rose 4.0 percent, well above the 2.6 percent national average. Just shy of $1,200, Twin Cities rent still trails the $1,350 U.S. average. These fundamentals have led Yardi Matrix to project rent growth of 3.9 percent in 2017.
