Twin Cities' luxury apartment boom

The boom of luxury apartments in the Twin Cities

BROOKLYN PARK, Minn. -- Brenda Sandberg has not rented an apartment in more than 25 years.

"I had a home for many years and there came a point where I realized I was ready to downsize," said Sandberg, a second grade teacher and lifelong Minnesotan.

This summer, Sandberg sold her home in Brooklyn Park and moved just up the street to 610 West--the city's first market-rate apartment complex in more than 20 years.

"I don't even remember all the ins and outs of renting but this doesn't feel like a rental," Sandberg said.

610 West is a 480-unit luxury apartment complex developed by Doran Companies. Among the long list of amenities: a tunnel system connecting the complex to a 24,000-square-foot club house. Rent starts at about $1,300 dollars per month. The first portion of 610 West opened in August. The entire project will be finished in fall 2018.

"It's unlike anything else in the suburban marketplace and you'll pay 30 percent to 40 percent less for a unit here than you would for a comparable unit downtown," said Anne Behrendt, chief operating officer of Doran Companies.

More luxury apartments are being developed in the Twin Cities metro--driven by demand from baby boomers and millennials. 

According to Mary Bujold, president of Maxfield Research and Consulting, many empty nesters want rentals with home-like finishes.

"A lot of those people are coming from larger homes. They may have a second home or vacation home up north or down south and they want something that's nicer," Bujold said.

Young professionals are also drawn to luxury apartments.

"The market for entry-level homes is very, very tight," Bujold said. "So I think we see younger people renting longer than we traditionally have."

Despite the demand for luxury apartments, there is also a real need for affordable housing.

"It's been very, very difficult for people who are in that kind of middle-income group or have lower incomes because we are trying to put more workforce housing into the market but it's very difficult. There are scarce resources and the financing for those is complicated and so we have a significant demand for those units and almost always, when they do go up, they're leased pretty much before they even open," Bujold explained.

According to Axiometrics, the vacancy rate for the Twin Cities metro is less than three percent. Bujold said developers noticed about five years ago.

"Developers (national) had kind of ignored the Twin Cities for a long time... and then suddenly when our vacancy rates got down to two percent, everybody was like, 'Oh my gosh, we need to go to Minneapolis and start building,'" Bujold said.

According to Maxfield Research and Consulting, about 1,400 units were delivered in 2012. Four years later, Bujold predicts 3,500-3,900 units delivered in the metro in 2016.

Nationwide, RENTCafé reported that three-quarters of all new apartments in 2015 were high-end. Bujold said the average rent for a one bedroom in the Twin Cities metro is $1,398 for properties built in 2000 or later.

"Developers are really competing against one another to really make their investment stand out," said Robby Mailatyar, senior director of real estate with Greystar.

The Lakes, a Greystar development, will open in the fall. The boutique apartments in South Minneapolis overlook Lake Calhoun. Rent starts at $2,855.

"I think more renters are becoming renters by choice. They're really looking for the flexibility and convenience, along with those amenities and luxury finishes. So really you have everything that a home has to offer but it's maintenance free," Mailatyar said.

Mailatyar said developers focus on areas of employment and tend to follow the workforce, another reason why more luxury apartments are now being built in the suburbs. 

610 West in Brooklyn Park is less than a mile away from Target's Northern Campus.

"There has been tremendous job growth in the area and also tremendous commercial growth in the area," Behrendt said.

Brenda Sandberg said she was attracted to the area because of that growth, saying, "This is a place that already in just a few short weeks feels like home."


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