Apartment vacancy continues to hold steady across the Twin Cities amid an ongoing building boom for new multifamily rental housing. In its latest “Apartment Trends” report, Minneapolis-based Marquette Advisors reported an apartment vacancy rate of 2.4 percent across the metro at the end of the third quarter, down slightly from the vacancy rate of 2.5 percent reported a year ago.
Overall, Marquette Advisors found a rental vacancy rate of 2.1 percent in Minneapolis and 3.1 percent in downtown Minneapolis. The latest numbers for downtown Minneapolis reflect a notable drop from the vacancy rate of 5.7 percent that Marquette Advisors reported for the second quarter this year.
It’s not clear what caused the change in the downtown Minneapolis numbers. The Marquette Advisors report indicates: “Note that our calculations do not include all units which have opened within the past six months and are currently in lease-up.”
Marquette Advisors vice president Brent Wittenberg could not immediately be reached for comment Tuesday morning on the latest findings.
Across the Twin Cities, Marquette Advisors expects 4,946 new apartments to have opened in the metro by the end of 2014. For 2015, Marquette Advisors is forecasting an additional 3,600 new units. According to the report, 2,763 new apartments opened across the metro in 2013.
Throughout the apartment boom, downtown Minneapolis has been ground zero for many new apartment projects. According to Marquette Advisors: “Downtown Minneapolis has accounted for 40 percent of new construction and 33 percent of absorption in the region since December 2012.”
Recently completed projects in downtown Minneapolis include the 354-unit LPM Apartments and the 101-unit Vélo. The Nic on Fifth, a 26-story tower with 253 luxury units, is being completed in November. Projects under construction in downtown Minneapolis include the 262-unit 4Marq and the 319-unit Latitude 45.
Marquette Advisors reported a 3.1 percent vacancy rate for St. Paul and a 7.6 percent vacancy rate for downtown St. Paul. The latter ranks as the highest vacancy rate for any submarket in the metro at the end of September.
The three metro submarkets with the tightest apartment vacancy are Stillwater (0.4 percent), Crystal (0.8 percent) and Richfield (0.8 percent). In Stillwater, Marquette Advisors found a single vacant unit among 281 apartments surveyed.
Apartment vacancy rates of 5 percent or less are generally considered to be low vacancy markets that favor landlords. The average apartment rent across the Twin Cities is now $1,007 per month, an increase of 2.3 percent over the last year.
The Twin Cities apartment market still ranks at the low end of the spectrum compared to other national markets. New York-based Reis Inc., a real estate research firm, reported third quarter apartment vacancy in Minneapolis-St. Paul at 3.2 percent for the third quarter, lower than the national vacancy rate of 4.2 percent. (Different reports will often report different numbers due to variations in methodology.)
But there are signs that a shift could be underway in the market. The Reis report noted that national vacancy increased from 4.1 percent in the second quarter to 4.2 percent in the third quarter. That marked the first quarterly increase for apartment vacancy since the fourth quarter of 2009.
The bumpy housing market remains another factor driving today’s rental market. On Tuesday morning, the U.S. Census Bureau released a report that found the rate of home ownership in the U.S. hit 64.4 percent in the third quarter, the lowest rate seen in 19 years.
This article is reprinted in partnership with Twin Cities Business.