Halle Hughes from our team gleaned the following insights from the Twin Cities Apartment Summit:
Twin Cities Development
Unit deliveries in the Twin Cities are forecasted to decline by 60% in 2025, falling from an average of 11,000 units per year to just 4,000. Notably, affordable housing will make up an estimated 40% of new construction, doubling the historical average of around 20%.
Additionally, St. Paul is expected to lead in new construction and office-to-multifamily conversions throughout the Twin Cities metro are gaining momentum despite challenges navigating regulations, building constraints, construction costs, and funding.
Market Dynamics
Multifamily cap rates are expected to be between 6-6.5%. Apartment vacancy rates in the Twin Cities are projected to hold steady at 4.5%, while rent growth is anticipated to reach 3.7% in both 2024 and 2025. With a sharp decline in new deliveries expected next year, substantial rent increases are likely by 2026.
Investor Confidence
Investors are returning to St. Paul as rent control policy measures have eased, enabling more room for rent growth and sustained buyer interest.
Millennials Drive Rental Market Shift
With a 45% gap between average mortgage payments and rent, and the average first-time homebuyer age rising from 31 to 38, millennials are increasingly choosing build-to-rent options. These properties offer more space and affordability without the burdens of homeownership, fueling a growing demand for rentals.
Sustainability Focus
Passive house designs, all-electric buildings, and geothermal energy are gaining traction for energy efficiency, long-term savings, and potential carbon tax avoidance.
Property Management Evolution
Centralization and AI-driven tools streamline operations, with technology improving application processes, security, and fraud prevention.
Technology in Rentals
Bulk internet services are becoming more common, offering cost savings for residents and landlords, despite owner hesitations.
Thanks to the event organizers and panel members for providing the latest trends on apartment properties in the Twin Cities.