Like most things in 2020, the multifamily housing market is in a state of flux. Recently, I had the opportunity to moderate the Bisnow webinar, Twin Cities Deep Dive: Multifamily Update. The panelists included Brent Webb, Development Manager, Mortenson, Christian Osmundson, Director of Development, Alatus, and Josh Brandsted, President of Greco Properties. These leaders of the multifamily housing market discussed the current state of the industry and made predictions for the future of the Twin Cities real estate market.
The webinar began with a look at how the pandemic has changed the multifamily housing market. Most notably, the panelists discussed how developers are beginning to take a closer look at first and second-tier suburban markets. Many projects located in Minneapolis are not receiving the same attention from developers that they once received. The panelists discussed how vacancy rates in high-demand areas like the North Loop, North East, and South Minneapolis have remained steady while downtown vacancy rates have declined in recent months.
Many rental properties in the suburbs that were hovering near 80% are now at full occupancy. Although migrating to the suburbs could be a short-term trend, the two leading factors for renters leaving downtown are home purchase and crime. These factors coupled with the closure of restaurants, land values, taxes, and a lack of parking have given investors pause when considering investing in the downtown market.
A “new” inclusionary zoning policy went into effect the first of the year in Minneapolis and the country went into a state of lockdown shortly thereafter. It is hard to separate its impact from the pandemic, but the added challenge of supporting affordable housing seems to be a factor in development. Places like Edina and Saint Louis Park have more tools than Minneapolis to make the math work for new projects.
Panelists agree the influx of remote workers has impacted the multifamily housing market. Buildings currently under construction are being modified to accommodate work from home offices and increase connection to outdoor recreation. Larger units and two-room apartments have also seen an increase in popularity since working from home has become commonplace.
It may be too soon to see new projects being designed with pandemic restrictions in mind, but the panelists felt that there will be a significant change coming to future builds. A prioritization of wellbeing and amenities seems unavoidable with most of the population spending more time at home. The amount of leasable space vs. amenities in new buildings will become critical when creating an environment attractive to future renters.
Finally, the panel discussed the eviction moratoria during the pandemic. There was a general consensus among the panelists that the moratorium is not impacting the market as the majority of renters dealing with financial hardships seem to be willing to create a plan with their landlords. There seem to be conflicting views on the best way to proceed, but all the panelists agreed that open communication is essential to creating a way forward.
Click here to listen to the Twin Cities Deep Dive: Multifamily Update webinar.
Jacob Steen part of the Larkin Hoffman real estate team. He is available to answer your real estate and land use questions. Jacob Steen, firstname.lastname@example.org.