Strong job growth, new residents support consistent apartment demand
In the Twin Cities market, new apartment construction will achieve its highest level since the year 2000; developers are slated to increase available rental units by 2% by completing construction of about 6,000 apartments in 2016. Despite this increase in supply, Minneapolis/St. Paul has the 5th lowest multifamily vacancy rate in the nation, behind only Boston (1), Sacramento (2), Northern New Jersey (3) and Portland (4). Vacancy rates for Minneapolis/St. Paul are below 4% and rental rates are at an average of $1,155, a new high for the metro area. The addition of over 100,000 jobs over the past 3 years has induced job seekers to relocate to Minnesota in order to take advantage of new opportunities, adding to the rental demand. Indeed, the population of the MSP metro increased by nearly 40,000 people in 2015.
Job growth for the area was calculated at 1.7% for 2015, with the one-third of the gains belonging to education and health services. Continuing the positive jobs trends, an additional 35,000 jobs are projected to be added for 2016, and the unemployment rate decreased last year to close December 2015 at 3.4%. Although the addition of new apartment stock will cause a slight increase in the vacancy rates in the upcoming year, vacancies should be below the traditional replacement rate due to the combined pressures of upcoming increases in population, continuation of the attractive job market, preference for the amenities and accessibility offered with urban apartments, and delayed home ownership due to increasing prices for single-family homes.
Lowest 2016 Multifamily Vacancy Rates. (2016, May/June). Commercial Investment Real Estate, p. 7.
Marcus & Millichap. (2016). Multifamily Research Market Report Minneapolis-St. Paul Area.