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The Twin Cities apartment market, which had been in recovery mode throughout much of 2010, continued to make big strides in terms of plunging vacancies as the year ended, a pair of new reports indicate.

The surge in apartment demand is being fueled both by an improving local economy and a pronounced shifting away from home-owning. Young people who had been living with their parents are now finding jobs, moving out and renting apartments rather than buying homes, as they might have during the housing bubble.

GVA Marquette Advisors, which conducted one of the studies, noted the Twin Cities added 17,300 workers in 2010. The big majority of the hires came in the first six months of the year and landlords starting feeling the effects shortly thereafter.

"It was a tale of two halves last year," said Jon Hornig, vice president of the Hornig Companies, which owns more than 3,000 apartment units in Minnesota. "The first half of the year was one of the worst six-month periods in the last decade, especially in the suburban areas.

"Then all of sudden things started to really tighten up in the second half of the year."

That's when young "echo boomers," with new jobs finally secured, started moving out of their parents' basements and into the apartment market, favoring in-city properties rather than suburban locales.

GVA showed a big decline in the rate of vacancies in Twin Cities metro apartments last year, from 7.3 percent at the end of 2009 to a mere 3.8 percent 12 months later.

GVA's figures showed a marked preference for inner-city rental properties. In downtown Minneapolis, the vacancy rate plunged nearly 6 percentage points in the fourth quarter of 2010 from the year-earlier figure. Downtown St. Paul saw an even bigger vacancy drop of 7.5 percentage points, from 10.1 to 2.6 percent.

Suburban areas were much more varied. Edina saw a drop of 7 percentage points from 2009. Brooklyn Park's vacancy rate fell only 2.3 percentage points; and St. Louis Park's saw a 3.4 percentage point decline.

There was also a huge turnaround in "absorption," the difference between the number of units being filled and the number coming vacant. In 2009, GVA said there was "negative absorption" of 3,450 units in the Twin Cities market, meaning thousands more apartments were vacated than taken. But last year the metro area saw positive absorption of 6,400 market-rate units.

Another report aimed at investors looking to purchase apartments -- Marcus & Millichap's 2011 National Apartment Report -- predicted Minneapolis-St. Paul will outperform other Midwestern markets this year and that the southwest metro submarket will see vacancy rates below 3 percent for first time since 2000.

The rents landlords have been able to charge also haven't budged much as they find themselves finally emerging after nearly a decade of being battered first by the home-buying frenzy and then by the recession that followed it.

"We're still seeing some rent concessions in some areas, although for the most part rents have stabilized," Hornig said, adding he's "cautiously optimistic" 2011 will indeed be a comeback year for the apartment market. But he warned, "I've got some properties out there that are north of 10 percent vacancy."

It's especially tough to attract young renters to aging suburban apartments that may not have the amenities or locations that 20-somethings are looking for, said Josh Floring, a broker for the Ackerberg Cos. who specializes in apartment building sales.

Members of the "echo-boom" generation "tend to live within 10 to 20 minutes of where they work and prefer to take transit rather than drive. There's a lack for product for them in this market right now."

Floring said one reason vacancies are declining is that few new apartment units are being built due to still-tight financing requirements that shut out even the most creditworthy of would-be developers, despite the improving economy and surging demand.

The Marcus & Millichap report indeed has again pegged Minneapolis-St. Paul in the nation's top 10 apartment investment markets based on its forecasted employment growth, vacancies, housing affordability and other factors. But the investment market for existing buildings in the Twin Cities is extremely competitive, Floring said.

"Investors come to Minnesota looking for opportunities because they see it as a stable state with a smart population, but what they find is that we never overbuilt like they did on the coasts," he said. "That's why our numbers are so good. You have to wait a long time for a quality asset to become available and when it does, it attracts a lot of interest."

That's exactly what will happen in 2011, the report predicted, saying rising demand will result in "seldom-listed" Twin Cities properties coming onto the market. Low interest rates will prompt well-heeled investors to stretch their credit to get into them, despite the high prices they're likely to fetch, especially in Uptown and the southwestern and western suburbs.

Marcus & Millichap also predicted that the Twin Cities will add 25,000 new jobs in 2011, up from the 17,300 of last year, thus keeping demand high.

It singled out the southwest apartment market as a potentially hot one this year due to the relocation of around 1,600 U.S. Bancorp workers from St. Paul to the Meridian Crossings office park in Richfield. That move could cause vacancy rates in that part of town to head below 3 percent for the first time since 2000, the firm said.

Don Jacobson is a St. Paul-based freelance writer.