$1,440 4Q 2023
$1,489 4Q 2024
3.4%
94.5% 4Q 2023
94.2% 4Q 2024
-30 basis points
1.97M 2023
1.99M 2024
2.9% 2023
3.5% 2024
* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.
** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.
The influx of new housing supply in Minneapolis is anticipated to moderate from the high levels of over 10,000 units annually seen since 2021, moving towards a more sustainable figure of 6,241 units.
A minor reduction in the average occupancy rate is foreseen, influenced in part by an excess of supply that originated in 2023.
The forecast for 2024 suggests an uptick in rent growth to 3.4% by the final quarter of 2024, as the number of new completions declines while demand remains strong.
The healthcare, construction, and leisure and hospitality sectors are expected to drive job creation to the tune of an additional 15,800 positions.
FORECASTED ABSORPTION
FORECASTED NEW SUPPLY
Last year, the Minneapolis housing market displayed a significant imbalance, with a total of 11,300 new units delivered, surpassing the absorption rate of 8,800 units. However, it’s important to note that Minneapolis is one of only three major U.S. markets to have witnessed its average annual absorption over the past three years more than double the average from 2017 to 2019. This trend suggests that the market shifts in Minneapolis are predominantly driven by supply-side factors. Nonetheless, this marks the third time in the past four years that supply has exceeded demand in the city’s housing market.
Looking ahead to 2024, the influx of new housing supply in Minneapolis is anticipated to moderate from the high levels of over 10,000 units annually seen since 2021, moving towards a more sustainable figure of 6,241 units. This adjustment is expected to align better with the market demand. Demand in Minneapolis is forecasted to match this new level of supply throughout the year. Nonetheless, a minor reduction in the average occupancy rate is foreseen, influenced in part by an excess of supply that originated in 2023. As a result, the average occupancy rate is projected to experience a modest decline of about 30 basis points from its fourth-quarter 2023 rate, settling approximately at 94.2% by the end of 2024. This slight dip, while noteworthy, is within the context of a market adjustment to a more balanced supply-demand dynamic.
The 2024 forecast for the Minneapolis apartment sector anticipates the addition of approximately 6,241 units, which represents a significant year-over-year decrease of nearly 45%. The substantial drop in supply-side pressure has been influenced by rising interest rates and a reduction in construction lending, leading to construction starts reaching a six-year low in 2023, a near 60% decrease from the record highs of 2022. The combination of reduced completions and the continuation of healthy demand suggests a pivotal market shift for the Twin Cities. Moving from a recovery to a stability phase, the market is expected to align with historical growth patterns by 2025, indicating a more balanced and sustainable development trajectory in the coming years.
Average Monthly Mortgage Payment
Average Monthly Rent
The substantial surge in housing supply in Minneapolis has notably impacted landlords’ capacity to increase rents. Since the beginning of 2024, the market has seen less than 6.5% cumulative rent growth, ranking it as the fourth lowest among the top 50 U.S. markets, only surpassing the Bay Area markets in California. The final quarter of 2023 saw modest rent growth of 0.7% in Minneapolis, aligning closely with the U.S. average of 0.8%. Looking forward, the forecast for 2024 suggests an uptick in rent growth to 3.4% by the final quarter of 2024, as the number of new completions declines while demand remains strong. This growth rate is expected to accelerate further into 2025, as the effects of the recent supply wave continue to diminish, allowing for a more balanced and robust rental market in Minneapolis.
| Submarket | Q4 2023 Stabilized Occupancy | Q4 2024 Stabilized Occupancy (f) | Annual Occupancy Change (2024/2023) | Q4 2023 Average Monthly Rent | Q4 2024 Average Monthly Rent (f) | Annual Rent Change (2024/2023) |
|---|---|---|---|---|---|---|
| Anoka Northern Suburbs | 89.8% | 89.2% | -0.6% | $1,367 | $1,409 | 3.1% |
| Apple Valley/Lakeville/Hastings | 94.2% | 93.9% | -0.3% | $1,477 | $1,527 | 3.4% |
| Bloomington West | 94.4% | 94.1% | -0.3% | $1,520 | $1,569 | 3.2% |
| Carver County | 98.2% | 98.0% | -0.2% | $1,609 | $1,664 | 3.4% |
| Chisago Outlying Northern Suburbs | 95.0% | 94.6% | -0.4% | $1,037 | $1,077 | 3.9% |
| Coon Rapids/Fridley/Blaine | 95.1% | 94.8% | -0.3% | $1,292 | $1,339 | 3.6% |
| Dayton/Champlin/Brooklyn Park | 94.2% | 93.8% | -0.4% | $1,315 | $1,362 | 3.6% |
| Downtown Minneapolis | 92.0% | 91.6% | -0.4% | $1,708 | $1,762 | 3.2% |
| Downtown St Paul | 91.7% | 91.3% | -0.4% | $1,463 | $1,516 | 3.7% |
| Eagan/Burnsville/Inver Grove Heights | 95.3% | 95.0% | -0.3% | $1,459 | $1,508 | 3.4% |
| Eden Prairie | 94.2% | 93.9% | -0.3% | $1,655 | $1,716 | 3.7% |
| Edina | 96.2% | 95.9% | -0.2% | $1,855 | $1,916 | 3.3% |
| Hennepin Far Western Suburbs | 95.1% | 94.8% | -0.3% | $1,606 | $1,658 | 3.2% |
| Highland/M | 94.4% | 94.1% | -0.4% | $1,329 | $1,377 | 3.6% |
| Isanti Northern Suburbs | 95.9% | 95.5% | -0.4% | $1,271 | $1,317 | 3.6% |
| Maple Grove/Golden Valley/Plymouth | 94.4% | 94.1% | -0.3% | $1,551 | $1,605 | 3.5% |
| Maplewood/East Ramsey County | 95.3% | 95.0% | -0.3% | $1,423 | $1,474 | 3.6% |
| North Minneapolis | 98.3% | 98.1% | -0.2% | $1,371 | $1,412 | 3.0% |
| Northeast Minneapolis | 97.0% | 96.7% | -0.2% | $1,409 | $1,450 | 2.9% |
| Outlying St Paul | 95.0% | 94.6% | -0.3% | $1,210 | $1,255 | 3.7% |
| Pierce Far Eastern Suburbs | 96.2% | 95.9% | -0.4% | $1,031 | $1,075 | 4.2% |
| Richfield/Bloomington East | 96.0% | 95.7% | -0.3% | $1,299 | $1,345 | 3.6% |
| Scott Far Western Suburbs | 89.0% | 88.5% | -0.5% | $1,471 | $1,516 | 3.1% |
| Sherburne County | 95.4% | 95.0% | -0.4% | $1,164 | $1,203 | 3.3% |
| South Minneapolis | 94.9% | 94.5% | -0.4% | $1,212 | $1,258 | 3.8% |
| South St Paul | 93.3% | 92.8% | -0.4% | $1,241 | $1,283 | 3.4% |
| St Croix Far Eastern Suburbs | 96.8% | 96.5% | -0.3% | $1,292 | $1,341 | 3.8% |
| St Louis Park/Hopkins | 95.1% | 94.8% | -0.3% | $1,510 | $1,557 | 3.1% |
| University | 93.3% | 92.9% | -0.3% | $1,675 | $1,733 | 3.5% |
| Uptown/West Calhoun/Bryn Mawr | 93.0% | 92.6% | -0.4% | $1,454 | $1,501 | 3.2% |
| Washington Far Eastern Suburbs | 94.6% | 94.3% | -0.3% | $1,628 | $1,679 | 3.1% |
| West Bank/Central Minneapolis | 95.1% | 94.7% | -0.4% | $1,115 | $1,153 | 3.4% |
| West Ramsey County | 93.6% | 93.2% | -0.4% | $1,287 | $1,333 | 3.6% |
| West Side | 92.9% | 92.5% | -0.4% | $1,225 | $1,258 | 2.7% |
| West St Paul | 95.9% | 95.7% | -0.2% | $2,413 | $2,475 | 2.6% |
| Wright Far Western Suburbs | 97.8% | 97.5% | -0.2% | $1,379 | $1,425 | 3.3% |
| Market | 94.5% | 94.2% | -0.3% | $1,440 | $1,489 | 3.4% |
4Q 2023 Unit Inventory
Number of Units Under Construction
Number of Units UC Delivering
In the Next 4 Quarters
| Submarket | Unit Inventory: 4Q 2023 | Units Under Construction | % of Existing Inventory UC | % of Total UC | Units UC Delivering In the Next 4 Quarters |
|---|---|---|---|---|---|
| Anoka Northern Suburbs | 1,067 | 0 | 0% | 0% | 0 |
| Apple Valley/Lakeville/Hastings | 8,626 | 629 | 7% | 5% | 423 |
| Bloomington West | 5,619 | 149 | 3% | 1% | 147 |
| Carver County | 2,994 | 1,236 | 41% | 10% | 411 |
| Chisago Outlying Northern Suburbs | 715 | 0 | 0% | 0% | 0 |
| Coon Rapids/Fridley/Blaine | 13,877 | 0 | 0% | 0% | 0 |
| Dayton/Champlin/Brooklyn Park | 7,037 | 115 | 2% | 1% | 73 |
| Downtown Minneapolis | 16,577 | 2,212 | 13% | 18% | 803 |
| Downtown St Paul | 3,645 | 387 | 11% | 3% | 0 |
| Eagan/Burnsville/Inver Grove Heights | 16,000 | 0 | 0% | 0% | 0 |
| Eden Prairie | 4,926 | 664 | 13% | 5% | 423 |
| Edina | 6,351 | 196 | 3% | 2% | 194 |
| Hennepin Far Western Suburbs | 10,137 | 105 | 1% | 1% | 102 |
| Highland/M | 9,961 | 0 | 0% | 0% | 0 |
| Isanti Northern Suburbs | 973 | 65 | 7% | 1% | 64 |
| Maple Grove/Golden Valley/Plymouth | 19,953 | 1,334 | 7% | 11% | 464 |
| Maplewood/East Ramsey County | 8,066 | 420 | 5% | 3% | 418 |
| North Minneapolis | 2,048 | 26 | 1% | 0% | 25 |
| Northeast Minneapolis | 3,785 | 160 | 4% | 1% | 159 |
| Outlying St Paul | 21,208 | 1,453 | 7% | 12% | 299 |
| Pierce Far Eastern Suburbs | 1,499 | 0 | 0% | 0% | 0 |
| Richfield/Bloomington East | 10,209 | 99 | 1% | 1% | 96 |
| Scott Far Western Suburbs | 5,082 | 493 | 10% | 4% | 286 |
| Sherburne County | 3,209 | 0 | 0% | 0% | 0 |
| South Minneapolis | 3,740 | 50 | 1% | 0% | 49 |
| South St Paul | 4,170 | 111 | 3% | 1% | 110 |
| St Croix Far Eastern Suburbs | 2,433 | 0 | 0% | 0% | 0 |
| St Louis Park/Hopkins | 13,930 | 570 | 4% | 5% | 379 |
| University | 7,488 | 0 | 0% | 0% | 0 |
| Uptown/West Calhoun/Bryn Mawr | 12,736 | 470 | 4% | 4% | 311 |
| Washington Far Eastern Suburbs | 10,001 | 862 | 9% | 7% | 499 |
| West Bank/Central Minneapolis | 17,505 | 79 | 0% | 1% | 75 |
| West Ramsey County | 11,396 | 201 | 2% | 2% | 0 |
| West Side | 959 | 221 | 23% | 2% | 220 |
| West St Paul | 458 | 126 | 28% | 1% | 125 |
| Wright Far Western Suburbs | 3,611 | 87 | 2% | 1% | 86 |
| Market | 271,991 | 12,520 | 5% | 100% | 6,241 |
According to preliminary data from MSCI, the sales volume for conventional multifamily assets in 2023 ended on a relatively positive note. The fourth quarter of the year recorded a sales volume of $275.2 million, which was just below the pre-pandemic average of $290 million for a comparable period. For the entire year, the total transaction volume reached $700.7 million, distributed across 40 individual asset sales. This volume represents a 54% reduction from the previous year’s figure. However, it is noteworthy that this annual total is more in line with the pre-pandemic annual averages, suggesting a return to more typical market conditions.
Looking forward to 2024, the market could present attractive opportunities for discerning investors, especially if interest rates stabilize or decline. This environment could lead to the emergence of more attractively priced deals, offering potential for long-term investments in the multifamily sector. This scenario underscores the importance of market timing and strategic investment decisions in the context of evolving economic conditions.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
P=Preliminary
| Sector | Employment Change 2023 to 2024 | Percent Change |
|---|---|---|
| Overall Employment | 15,800 | 1.8% |
| Manufacturing | (1,000) | -0.5% |
| Construction | 1,300 | 1.5% |
| Trade, Transport., & Utilities | 2,500 | 0.7% |
| Information | (400) | -1.0% |
| Financial Activities | (2,400) | -1.8% |
| Professional & Business Services | (1,300) | -1.0% |
| Education & Health Services | 8,200 | 2.3% |
| Government | 4,600 | 1.9% |
| Lesuire & Hospitality | 4,700 | 2.5% |
| Other Services | (300) | -0.4% |
The Minneapolis-St. Paul metro area is poised for moderate growth in 2024, likely benefiting from a projected $2.4 billion state budget surplus and stabilizing housing market. While interest rates may dip slightly, affordability remains a challenge, especially for first-time buyers. The healthcare, construction, and leisure and hospitality sectors are expected to drive job creation to the tun of an additional 15,800 positions, even as national economic uncertainties linger. Overall, the Twin Cities should see steady economic progress in the coming year.
