Graphic: How do rent rates compare in the hottest Minneapolis neighborhoods?
Despite a heavy load of new supply that has been added to the market, vacancies remain tight across the Twin Cities.
The big story in the Minneapolis metro has been an ongoing construction boom that is now entering its fifth year. In the past two years alone, developers have completed in excess of 7,000 new units with 4,291 new units added in 2014 and 3,032 completions in 2015, according to a year-end report published by Cushman & Wakefield. Based on current and proposed projects, the company anticipates another strong year ahead with 4,000 units coming online this year.
The new supply is coming from ground-up construction, as well as a variety of property conversions. For example, Minneapolis-based Dominium recently transformed the former Pillsbury flour mill complex on the east bank of the Mississippi River in Minneapolis into the A-Mill Artist Lofts. The 251-unit affordable housing project opened in summer 2015 with an aim to serve working artists. Much of the development and redevelopment occurring has been concentrated in Minneapolis and St. Paul, including both downtowns, as well as Minneapolis neighborhoods such as Uptown, the North Loop and the area surrounding the University of Minnesota campus. Close-in suburbs such as the West End in St. Louis Park and 50th & France in Edina also have emerged as residential hot spots for Millennials.
Notable Minneapolis Projects
- WaHu Student Apartments: Located at the intersection of Huron Boulevard and Washington Avenue SE this 327-unit luxury student apartment complex opened in fall 2015.
- Radius @ 15th: The 202-unit student apartment property located on 15th Avenue SE in Minneapolis opened in fall 2015.
- Kansas-based developer Chris Elsey received city approval for its development application to build a 195-unit, six-story student apartment in the Prospect Park neighborhood near the University of Minnesota.
- Prospect Park Station: CA Ventures is proposing a large mixed-use development on University Ave. S.E. that would include a 258-unit apartment complex, a 120-room hotel and about 36,000 square feet of commercial space.
Millennials, empty nesters drive demand
Despite the new supply, occupancies remain near historically low levels. In fact, Twin Cities vacancies have been hovering below 3% for the past four years. Vacancies at the end of third quarter stood at 2.3%, or 2.7% when including those newly opened properties that are still undergoing lease-up, according to Cushman & Wakefield.
One of the big drivers behind that demand has been strong job growth. The metro area added about 30,700 jobs in the 12-month period ending in November 2015, according to the Bureau of Labor Statistics. The Twin Cities metro also has a large student population with more than a dozen colleges and universities that combined have a student enrollment greater than 100,000. The University of Minnesota alone has a current enrollment of more than 51,000.
What’s ahead in 2016
One of the notable trends in the Minneapolis metro is that the high cost of building new housing has some developers testing a new “micro” size unit that offers renters a more affordable option for a compact space that ranges between 250 and 350 square feet. There also are signs that new development may be reaching a saturation point in the urban core. The pipeline of projects in Minneapolis and St. Paul is starting to shrink as developers shift their attention to suburban markets such as Hopkins, Eagan and Maple Grove.