Low Vacancy and Above-Average Incomes Drive New Multifamily Development
The overall market for multifamily development is doing very well across the Twin Cities. We are experiencing a greater development wave in outer ring suburbs vs. core urban areas with total suburban multifamily sales more than doubling in volume. Suburban sales have slowed a bit since their peak in 2016; however, urban sales have consistently increased every year.
Highlights from the JLL Minneapolis-St. Paul Multifamily Investment Outlook includes:
- Price per unit is significantly higher for urban transactions even though total dollar volume is lower for urban vs suburban transactions.
- Although rental rates continue to grow, the rate of growth is finally slowing. In 2017 Minneapolis was the last large market to continue seeing quarter-over-quarter rental rate escalation.
- Class B and C multifamily properties are seeing strong performance due to a large share of users prioritizing affordability.
- Paul continues to be a more affordable urban alternative to Minneapolis, which is contributing to lower rental vacancy rates in St. Paul.
- Rental rate growth in inner suburbs, such as St. Louis Park and Edina, is still positive; however, we may be seeing the first sign of a slowdown, which would be in line with more urban trends.
- The rental market in outer suburbs remains the strongest for occupancy and low turnover. Unlike urban and inner ring markets, there is still room for rental rate growth to escalate through the remainder of 2018.
- Development momentum is moving to Northeast Minneapolis, University East Bank, and St. Paul Midway as the latter heats up along with the Allianz Field soccer stadium construction in the heart of Midway.
- Golden Valley, Edina and St. Louis Park are the most active inner suburb cities while Shakopee leads all outer suburb cities for most units under construction.
Our Multifamily Investment Outlook includes a deeper look at urban and suburban industry pricing trends for your reference. To talk with the JLL team, feel free to reach out to Mox Gunderson, Dan Linnell or Josh Talberg for more