The work-from-home movement and hybrid scenarios have lingered on for longer than anyone first anticipated. Vacant offices have not only dampened urban core areas’ shine in most U.S. markets, but have also dictated a shift in living preferences. In Minneapolis-St. Paul, first-ring suburban submarkets became the most sought-after.
Overall, the metro’s multifamily market adhered to national trends of skyrocketing rents in late 2020 and early 2021, plateauing in May. Even though waters seem to have calmed down now, robust housing demand is still surpassing supply, according to a recent report by the Minneapolis Area Realtors.
Minneapolis-based The Opus Group has been very busy in the metro. The largest project the firm has underway now is a 250-unit market-rate community in St. Louis Park, Minn., a transit-oriented property that will include 25 units for households earning 50 percent or less of the area’s median income. Senior Director of Real Estate Development Nick Murnane and Real Estate Representative Anna Bode offered us their insights into how the pandemic impacted not only the Twin Cities’ multifamily market, but the company’s investment strategy as well.
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How is the Twin Cities multifamily market faring in the wake of the pandemic?
Murnane: The Twin Cities market, much like other markets across the U.S., is recovering slowly from the COVID-19 pandemic. We are seeing signs of the market coming back to pre-pandemic conditions. An example of this is the reduction in concessions. Early in the pandemic, we saw buildings offering anywhere from six to 12 weeks of free rent, coupled with free parking and other incentives. Now it’s closer to four to six weeks free.
Additionally, we are seeing more demand and activity for multifamily developments, however this is submarket-specific and can vary between locations. For example, the first-ring suburbs are garnering a lot of attention at the moment.
What are the greatest challenges in developing multifamily assets in the metro?
Bode: An overall challenge is the unknowns related to returning to the office. The vibrancy in the downtown central business district is not what it was when offices were at full capacity, so the draw to live downtown is a little less prominent. However, the North Loop area in Minneapolis continues to fare very well and first-ring suburbs are also seeing positive traction with regard to multifamily development.
Has demand within the multifamily market changed since your last interview with MHN two years ago?
Murnane: I would not say that demand has changed in the past two years, however, there are more options available now across the Twin Cities. We are seeing renter demand expand from the urban core to the suburbs, which wasn’t as prevalent two years ago.
Please name the hottest areas for multifamily development in the metro.
Bode: The North Loop continues to be the strongest neighborhood within Minneapolis. First-ring western suburbs have become very attractive as well. Edina, St. Louis Park and Minnetonka are all seeing a significant amount of multifamily development activity.
Which are your biggest multifamily projects within the Twin Cities market?
Murnane: We have two projects in Minneapolis that are open and operating, 365 Nicollet and Vesi North Loop. Our largest development under construction at this time is a 250-unit, market-rate apartment project in St. Louis Park along Beltline Boulevard.
Did the global health crisis influence The Opus Group’s multifamily investment strategy?
Murnane: COVID-19 impacted all aspects of life, including how we approach our real estate investments.
With significantly more people working from home, space is being adapted to accommodate that requirement—new projects have significantly more dedicated common-area space to offer variety of work-from-home environments so residents can work comfortably, and that includes both indoor and outdoor spaces. We are also being thoughtful in our unit designs to incorporate enough space for a desk in the living area.
What are you predicting for the metro’s multifamily market for the year to come?
Murnane: I think the Twin Cities market will continue to recover from the COVID-19 pandemic as well as the civil unrest. We expect to see positive leasing momentum, increasing traffic as the workforce returns to the urban core, and increasing demand for first-ring suburban multifamily projects.