Twin Cities 3Q23
Multifamily Market Report

$1,536

average rent

94.8%

average occupancy rate

$431.1M

ytd sales volume

1.0%

YoY rent change

-0.7 POINTS

yoy occupancy change

32 YTD

individual transactions

Supply & Demand

3Q23

3,850 Units

QUARTERLY DEMAND
YTD: 6,014

2,779 Units

QUARTERLY COMPLETIONS
YTD: 5,898

Annual Demand vs Completions

2018
5,190
4,863
2019
3,626
5,215
2020
5,100
8,075
2021
12,865
10,105
2022
1,952
9,178
2023 YTD
6,014
5,898
  • Planned
    Completions
  • Pre-Planned
    Demand

Demand Trends

  • In the 3rd quarter of 2023, the apartment market in the Twin Cities experienced a remarkable surge in demand, ranking it among the nation’s top five markets for quarterly absorption.

 

  • During the July to September period, a total of 3,850 units were absorbed in the Twin Cities, substantially exceeding the pre-COVID 10-year average (from 2010 to 2019) of around 1,300 units absorbed each 3rd quarter.

Completion Trends

  • As of the 2023 calendar year, a total of 5,898 units have been added to the Twin Cities apartment market inventory. This robust addition far outpaced the 10-year annual average of approximately 3,300 new units.

 

  • Over the past year, 13 of Minneapolis’ 14 submarkets have seen the addition of new apartment supply. Leading the way in this development surge were the submarkets of East St. Paul, Anoka County, and Plymouth/Maple Grove.

Demand Outlook

  • Over the next four quarters, all submarkets in the Twin Cities are expected to experience positive net absorption. Renters are anticipated to absorb more than 13,000 units, comfortably outpacing the approximately 10,500 new units that are slated to become available during the same period.

 

  • In terms of specific areas, the Downtown Minneapolis/University and East St. Paul submarkets are projected to witness the most robust demand. These two submarkets are collectively expected to account for a net absorption of 3,550 units over the next four quarters.

New Supply Outlook

  • As of the end of the 3rd quarter in 2023, the Twin Cities had a substantial number of units under construction, totaling 14,247. Of these, 10,466 units are slated for completion within the coming 12 months, indicating a busy year ahead for the local apartment market.

 

  • Among the submarkets, three are set to receive significant new supply in the next year, with more than 1,000 units each. Downtown Minneapolis/University is leading the pack, expected to welcome over 1,800 new units.

Occupancy & Rent Trends

RENT VS OWN
MONTHLY PAYMENT

$2,445

Average Monthly Mortgage Payment

$1,536

Average Monthly Rent

* The Average mortgage payment is based off a median home sales price of $323,000 as reported by the Zillow.com as of Aug 2023.

Occupancy trends

Despite strong quarterly absorption in the Twin Cities, an annual imbalance between supply and demand led to a 0.7 percentage-point drop in market-wide occupancy, settling at 94.8% in the 3rd quarter of 2023—below the pre-COVID long-term average of 95.7%. This drop has disproportionately impacted Class A properties, which registered a 94.0% occupancy rate, as new supply has been abundant over the past five years. In contrast, Class B and Class C properties have maintained more robust occupancy levels at 95.1% and 95.0%, respectively. Occupancy rates have also varied at the submarket level, with Bloomington leading at 96.4%, while Downtown Minneapolis/University recorded the lowest rate at 92.5%.

RENTAL TRENDS

In the Twin Cities, rent growth has been relatively modest when compared to other markets, averaging 1.7% pre-COVID and 1.9% thereafter. The annual growth in effective asking rents reached a modest 1.0% in the 3rd quarter of 2023, marking Minneapolis’ weakest performance since the Great Recession, apart from the rent cuts witnessed during the COVID lockdowns. When dissected by product class, Class B properties outperformed with a rent growth of 1.5%, followed by Class A and Class C units registering weaker increases at 0.8% and 0.3%, respectively. On a submarket level, the strongest annual rent change performances were recorded in Eden Prairie/Shakopee/Chaska and South St. Paul/Eagan, both of which experienced increases of 3% or greater.

Submarket Rent & Occupancy

SubmarketAverage OccupancyAnnual Occupancy ChangeAverage Monthly RentAnnual Rent Change
Downtown Minneapolis/University92.5%-0.8%$1,7410.3%
Uptown/St. Louis Park94.2%-0.7%$1,5970.0%
North Minneapolis93.7%-2.3%$1,360-0.4%
South Minneapolis/Richfield95.6%-0.5%$1,6831.2%
Bloomington96.4%-0.2%$1,5492.6%
Eden Prairie/Shakopee/Chaska95.4%0.3%$1,6373.2%
Minnetonka95.4%-1.1%$1,5860.0%
Plymouth/Maple Grove95.5%-0.1%$1,6621.0%
Anoka County95.6%-0.1%$1,3961.8%
Central St. Paul95.8%0.7%$1,5331.3%
West St. Paul93.5%-2.0%$1,3470.6%
East St. Paul94.7%-1.6%$1,4411.2%
South St. Paul/Eagan96.3%-0.2%$1,4843.0%
Burnsville/Apple Valley95.5%0.3%$1,5131.0%
Minneapolis-St. Paul-Bloomington, MN-WI94.8%-0.7%$1,5361.0%

Units by Submarket Delivering in 2023

14,247

Units Under Construction

10,466

Units UC Delivering In the Next 4 Quarters

Number of Units Under Construction

Downtown Minneapolis/University - 2,105
0%
Uptown/St. Louis Park - 959
0%
North Minneapolis - 430
0%
South Minneapolis/Richfield - 1,461
0%
Bloomington - 794
0%
Eden Prairie/Shakopee/Chaska - 1,691
0%
Minnetonka - 1,178
0%
Plymouth/Maple Grove - 1,520
0%
Anoka County - 569
0%
Central St. Paul - 287
0%
West St. Paul - 513
0%
East St. Paul - 1,090
0%
South St. Paul/Eagan - 707
0%
Burnsville/Apple Valley - 943
0%

Number of Units Delivering Next 4Q

Downtown Minneapolis/University - 1,849
0%
Uptown/St. Louis Park - 760
0%
North Minneapolis - 430
0%
South Minneapolis/Richfield - 1,138
0%
Bloomington - 552
0%
Eden Prairie/Shakopee/Chaska - 1,074
0%
Minnetonka - 797
0%
Plymouth/Maple Grove - 984
0%
Anoka County - 421
0%
Central St. Paul - 287
0%
West St. Paul - 91
0%
East St. Paul - 857
0%
South St. Paul/Eagan - 665
0%
Burnsville/Apple Valley - 561
0%

Sales Activity

In the Minneapolis-St. Paul-Bloomington metro area, the transaction dollar volume for single-asset multifamily transactions reached approximately $431.1 million through the 3rd quarter of 2023, representing a substantial year-over-year decrease of about 65%. Concurrently, the number of transactions fell by 32 over the past year, resulting in 32 conventional apartment properties changing hands. On the pricing front, the average price per unit in the metro area was around $184,000, marking a 10% annual decline. While this average price per unit surpassed the Midwest regional norm of $159,400, it remained below the U.S. average of $219,700.

  1. FPA Multifamily
  2. Weidner Apt Homes
  3. SR Realty Trust
  1. Belgarde Enterprises
  2. Roers Investments
  3. Trident Development

*Most Active Buyers and Sellers are based on the sale volume of apartment units.

TRANSACTION VOLUME


YTD Transaction Volume


Y-O-Y Change


Individual Transaction Count


Price Per Unit


Annual Price Change

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Economy

As of August 2023, Minneapolis demonstrates a dynamic employment landscape characterized by considerable growth in certain sectors and contractions in others. The Leisure and Hospitality sector led the way, adding 15,200 jobs, marking an impressive 8.1% year-over-year growth. Similarly, Education and Health Services also saw significant expansion, contributing 14,500 jobs, a 4.2% increase. Government roles expanded as well, with 6,300 new positions, constituting a 2.8% growth. On the flip side, sectors such as Financial Activities and Professional and Business Services recorded contractions of -2.3% and -1.2%, respectively. Overall, Minneapolis added 35,400 jobs annually, achieving an employment growth rate of 1.8%. Notably, the unemployment rate stands at 3.2%, which is lower than the national average of 3.8%, suggesting a relatively healthy job market.

35.4k

August Annual Jobs Created

1.8%

August 2023 Employment growth

3.2%

August 2023 Unemployment rate
3.8% us August rate

Top 5 Employment Sector Annual Change

Leisure & Hospitality

Leisure & Hospitality

Change from August 2022 to August 2023:
15,200

Percent Change:
8.1%

Education & Health Services

Education & Health Services

Change from August 2022 to August 2023:
14,500

Percent Change:
4.2%

Government

Government

Change from August 2022 to August 2023:
6,300

Percent Change:
2.8%

Trade, Transportation & Utilities

Trade, Transportation & Utilities

Change from August 2022 to August 2023:
3,000

Percent Change:
0.9%

Mining, Logging, & Construction

Mining, Logging, & Construction

Change from August 2022 to August 2023:
1,800

Percent Change:
1.9%

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SectorChange from Aug 2022 to Aug 2023 Percent Change
Leisure and hospitality15,200 8.1%
Education and health services14,500 4.2%
Government6,300 2.8%
Trade, transportation, and utilities3,000 0.9%
Mining, logging, and construction1,800 1.9%
Other services1,600 2.2%
Manufacturing900 0.4%
Information(700)-2.3%
Financial activities(3,400)-2.3%
Professional and business services(3,800)-1.2%

Cost of Living Comparison

When it comes to the cost of living, Minneapolis offers a more budget-friendly lifestyle compared to Chicago. According to the “Cost of Living” index, Minneapolis scores 93.2 overall, indicating a less expensive standard of living relative to the national benchmark score of 100. A significant advantage is evident in housing, where Minneapolis is 21.0% less expensive than Chicago. Utilities are slightly higher, with a 3.9% increase, but this is offset by savings in other areas. Groceries are 8.8% cheaper, transportation costs are 12.5% lower, and healthcare expenses are 5.9% less in Minneapolis. The median home sales price stands at $323,000 with a negligible year-over-year change of -0.1%, making homeownership relatively stable. Whether you are renting or buying, Minneapolis presents an economical alternative without sacrificing quality of life.

Chicago, IL vs. Minneapolis, MN
Cost of Living Comparison
Groceries:

8.8% Less
Housing:

21.0% Less
Utilities:

3.9% More
Transportation:

12.5% Less
Health:

5.9% Less
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Cost of Living Index

93.2

Index Score

Average Mortgage

$2,445

vs Average Rent: $1,536

Housing

85.5

Index Score

Utilities

94.3

Index Score

Gas

96.9

Index Score

Median Home Sales Price

$323,000

YoY Change: -0.1%

The “Cost of Living” index score provides a comparative assessment of the relative expense involved in maintaining a standard of living in a specific area, benchmarked against a national index score of 100.

Market Outlook

The Minneapolis-St. Paul-Bloomington apartment market shows promise, though incoming supply raises caution. About 10,500 of the 14,247 units in construction are due within a year, potentially impacting occupancy rates especially in urban areas. Economic recovery, marked by a 1.8% job growth as of August 2023, offsets some concern. Moderate rent growth is expected, hovering around 2% to 3% in the long term. While new supply may push occupancy rates below their 10-year average, it’s likely to stay just above current levels. Overall, the market outlook is cautiously optimistic.

Sources: RealPage; BLS; MSCI; The Council for Community And Economic Research (C2ER)

To Gain Further Insights Into The TWIN CITIES Market Please Reach Out To Our Team

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Alex Blagojevich

Executive Managing Director / Co-Founder

Image of Michael Sullivan

Michael Sullivan

Executive Managing Director / Co-Founder

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David Huey

Senior Director

Kendall Adams

Associate Advisor

Ryan Carter

Associate Advisor