The local apartment vacancy rate increased modestly in the third quarter but remains low amid the current apartment building boom.
On Monday, Minneapolis-based Marquette Advisors reported that the apartment vacancy rate at the end of the third quarter in the Twin Cities was 2.5 percent. That’s a slight uptick from the vacancy rate of 2.3 percent at the end of June, but lower than the 2.7 percent vacancy rate seen a year ago.
A vacancy rate of 5 percent is considered to an equilibrium point between landlords and tenants. According to Marquette Advisors, the local rental vacancy rate has been below 3 percent for 10 consecutive quarters, or two-and-a-half years. The average apartment rent is now $984 per month, an increase of 3.5 percent over the past year.
The overall apartment vacancy rate in Minneapolis is 1.9 percent, but it is higher in downtown Minneapolis at 3.3 percent. St. Paul reports a vacancy rate of 2.5 percent, with a vacancy rate of 2.1 percent in downtown St. Paul.
In its October issue, Twin Cities Business surveyed the outlook for the local apartment development pipeline, including what factors are driving the apartment boom.
In its latest report, Marquette Advisors tallied 1,675 new apartments that have opened in the Twin Cities during the first nine months of 2013, with another 1,100 units opening in the fourth quarter. But so far, apartment leasing is keeping pace with the completion of new apartments, with older Class B buildings also holding their own. Downtown Minneapolis has been the most popular market for developers.
Brent Wittenberg, vice president with Marquette Advisors, noted in his report: “We have continued to see a positive response to new apartment product in the downtown Minneapolis submarket. Supply and demand remain in balance to date, as existing ‘B’ product has held up so far in the face of new competition, buoyed by strong demand fundamentals, with positive momentum in the job market, favorable demographic trends, and an increasingly popular and ‘livable’ downtown neighborhood.”
Even amid increased competition, developers continue to pursue new projects. Twin Cities Business recently reported that Houston-based developer Hines is floating plans for a 25-story, 291-unit apartment tower in the North Loop area of downtown Minneapolis, the second phase of its Dock Street Flats project. The 185-unit first phase of Dock Street Flats, near Target Field, is set to open in December.