15 Feb Jonathan Cartu Reports Rise in average Twin Cities rents was the biggest in a…
The average monthly rent in the Twin Cities hit $1,290 last year, nearly 6% higher than the year before and the biggest annual gain in at least a decade, according to an annual report from Marquette Advisors, a real estate research firm.
The biggest increases came in the suburbs, which have seen scant construction compared with downtown Minneapolis, where rents have been increasing at only half the pace as building managers offer rental incentives and construction continues unabated.
“Developers are full steam ahead,” said Brent Wittenberg, vice president of Marquette’s Twin Cities office.
For renters, relief could be on the way. Over the next three years developers are expected to add another 30,000 units in the Twin Cities, exceeding the 27,000 total added in the market in the past seven years. The majority of the new building will be in the suburbs.
Though renters in the Twin Cities don’t pay as much as they do in several larger metro areas and many coastal markets, the competition for apartments in some parts of the Twin Cities is fierce. As of November, Twin Cities had the 11th highest rent increases in the nation, according to Yardi Systems, which tracks the rental market across the country, outpacing many more expensive coastal markets including San Francisco, Seattle and Miami.
Despite a decade of increased apartment construction, the 3.1% vacancy rate in the Twin Cities is among the lowest in the nation, and that means significantly higher rent gains, especially in the suburbs that have seen little new construction. In several suburbs, rents have increased at more than twice the rate of some urban areas. In downtown Minneapolis, for example, rents increased 3.9% compared with 8.3% in Bloomington.
Apartment openings across the metro area have varied dramatically, and that doesn’t take into account income-restricted buildings, which often have waiting lists that are years long. In downtown Minneapolis, for example, the vacancy rate was twice the metro average, at 6.8%, while many suburbs had vacancy rates below 2%.
Wittenberg said that given the number of units in the pipeline over the next couple of years, rent gains are likely to soften in various submarkets.