MINNEAPOLIS -- It is the current soundtrack of the metro -- bing, bang, apartment boom.
"It's the perfect storm. The supply is low, the rents are high and the financing interest rates to develop these are extremely low," Nicollet Partners Real Estate Appraiser Doug Wageman said Tuesday in response to the glutton of apartment construction going on currently in the Twin Cities metro.
For more than two years, the Twin Cities rental stats look more like the boroughs of New York City.
New York has a vacancy rate of 1.9 percent while the metro stands at 2.3 percent.
With numbers like that developers can't get the shovels in and the apartments built fast enough.
But with 7,000 under construction now and another 13,600 proposed one has to wonder if that's a bit much.
"Once the supply gets up there and there are more options then the vacancies creep up. The rents will start to taper off a little bit and you will see more concessions," Wageman said of the longer term.
A rent break is needed. The average market rent in the metro is $979 right now which is up over last quarter.
The building boom is in luxury rentals, high amenity construction catered to millennials and baby boomers willing to pay $1,300 to $1,500 a month in rent for a one bedroom.
In Minneapolis, alone 1,600 apartment units have opened this year. Last year, 3,200 went live. The biggest build out in nearly a decade.
"It's a dramatic demographic switch. For a half a century we say people flee out to the burbs and I think for the next half century at least we are going to see people fleeing back into the city," Minneapolis Community Planning and Economic Development director Jeremy Hanson Willis said.
But if nearly 20,000 units do make it from planning to reality as is on the table now, vacancy rates have to loosen up and with that, likely, rent prices will stabilize.
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