Vacancy rates. It’s a topic we haven’t heard much about recently. Perhaps that’s due to Covid-19, or more likely, due to the fact they have been so low in the Twin Cities the last several years they don’t seem worth mentioning.
Thanks to Covid-19 and rising rent, some of that may be changing.
In September, the vacancy rate in the Twin Cities was 3.6 percent. Yes, that’s low. Here’s the problem. One year ago they were 2.6 percent according to a report from Marquette Advisors.
While vacancy rates across the metro varied, the downtown areas of both Minneapolis and St Paul appear to be hardest hit. This is, in part, likely due, in part, to the amount of new construction in the areas. A second factor may be low-interest rates have enticed more affluent renters to buy a home rather than rent.
While the vacancy rate in the Twin Cities is still outstanding, too great of an increase results in landlords struggling to find tenants, and even lowering rent or offering incentives to entice people to live in their properties.
As duplexes, triplexes and apartment buildings are investment properties. Not homes. Their value is largely determined by the amount of rent they generate. Any reduction in rent eventually impacts their value.
If you’ve been thinking of selling your investment property, the vacancy rate certainly bears watching in the weeks and months ahead.