Twin Cities Apartment Availability Seen Tight

MINNEAPOLIS-Apartment rents are up nearly 10 percentacross-the-board in the Twin Cities, with central cityapartments seeing the most dramatic increases. The combination of fast population growth andsparse new construction will mean a continued rental rate rises and only a slight rise invacancy rates from their present level at 1.5 percent, experts say.

Apartment rents were up 9.7 percent last year to anaverage monthly rate of $751, according to Pat Smith,an apartment sales specialist with Coldwell BankerBurnet in Minneapolis. The biggest increases were seenin Minneapolis, up 16 percent, and St. Paul, up 12percent.

Vacancy rates, meanwhile, averaged about 1.5 percent,although some submarkets like Woodbury are in the 3.5percent to 4.5 percent range due to constructionactivity, Smith said.“In some cases, owners are passing on outrageousincreases in rents,” says Tom Cooper, a vicepresident and partner with the Minnesota BrokerageGroup.

Contributing to the rising rates is a continued dearthof new construction activity. Last year, just 1,097units were added to the Twin Cities multi-housingmarket and so far this year there have been only 640 newunits, Cooper said. Only eight multi-housing projectsare likely to go up between mid-2000 and mid-2001.Barriers to new construction remain,such as lack of available land zoned for high density,high property taxes, high construction costs, andcommunity resistance to high-density development.

Cooper sees rental rates rising a little slower andvacancy rates a little higher for the next year.Cooper projected a 6 percent to 9 percent rise inrental rates, and vacancy rates staying in the 1.5percent to 2.5 percent range.Both see the lack of affordable housing as a growingproblem, one without an apparent short-termsolution.

“No one has figure out housing for the low tomoderate income renter,” Cooper said. “The protestswill only get louder.”Smith and Cooper recently spoke at the Twin CitiesCommercial Real Estate Forecast Competition held atthe University of St. Thomas in Minneapolis. They arevying to come up with the most accurate 2001 forecastfor the multi-family housing market in a contestsponsored by the Minnesota/South Dakota CCIM(Certified Commercial Investment Member) Chapter.