New Apartments Increase Minneapolis Duplex Vacancy Rates

You may have noticed as you drive through the Twin Cities that there are a lot of new apartment buildings.

In fact, according to Marquette Advisors Apartment Trend report, about 18,000 new market-rate apartments have hit the Twin Cities market since 2021. Another 17,400 are set to join them this year and next.

The pace these units are getting filled has slowed somewhat. The absorption rate, (a fancy term for how many of them actually got rented) dropped from 2800 units during the first quarter last year to 1280 in this year.

Some experts think the drop is due to people leaving the state Others believe would-be residents are simply living with family and friends for longer periods of time. If that’s the case, it’s going to get tougher to fill vacancies.

And sure enough, vacancy rates rose in the first quarter from 3.6% to 4.8%.

A balanced rental market is 5%.

We’re getting very close to a time when housing providers and residents are on equal footing.

In other words, when vacancy rates go up, rents go down.

This may not show up in the form of reduced monthly rent. Rather, it often appears in the form of giving new tenants one month free when they sign a long-term lease, or including free utilities like high-speed internet in the rent.

Experts predict we may exceed 6 and 7 percent vacancy rates in some parts of the metro in a matter of months. Most predict suburbs like Hopkins and Saint Louis Park will suffer the biggest impact, as 6300 of this year’s 10,000 new units are slated to open in the southwest part of the metro area before year’s end.

And that’s going to make it tough for duplex owners in those areas to compete.

The good news is we are on the leading edge of these changes. Next week, I’ll talk about some proactive strategies Twin Cities duplex owners can begin to take in order to help cushion the blow.