The latest sign of confidence in the area's rental market is taking shape at 29th and Lyndale in south Minneapolis.
That's where Greco Development plans to build nearly 180 upscale apartments in the Lyn-Lake neighborhood of Uptown.
It's a location the company knows well. Within a block, the developer recently finished leasing up Blue, a 242-unit apartment building aimed at young professionals who "work hard and play hard," said Greco Vice President Brent Rogers.
Blue filled up faster than expected, emboldening the company to try to replicate its success.
The new project, still unnamed, will have a distinct identity, but will be aimed at the same demographic, Rogers said.
"The Lyn-Lake neighborhood has blossomed in the last five to 10 years," he said. "It's a very social and lively place."
The $34 million project will have retail on the first floor and apartments on the upper floors that will rent for $1,100 to $3,000 per month.
The project hasn't been through the site-plan approval process, but the company has owned the land since 2005 and already has the financing lined up through ASB Capital Management, a Washington, D.C., lender. ASB has financed previous projects for Greco.
Rogers said he expects construction to begin next March.
The company is in the midst of building several hundred apartments throughout the city. There's Flux, a 216-unit apartment building six blocks from Blue. And the company is using historic tax credits to renovate two warehouse buildings in the city's North Loop neighborhood. The company is also building a 115-unit senior housing project.
At a time when the For Sale market struggles to gain traction, the rental housing market has blossomed, and demand for rentals exceeds supply in some neighborhoods. In the Uptown area, for example, the average vacancy rate during the second quarter was a bit more than 2 percent, according to Marquette Advisors.
Much of the demand for rentals these days is being fueled by a combination of factors, including changing attitudes about homeownership. People know that if they buy today they might have to wait years before selling at a profit. And an urban renaissance is drawing people from all demographic groups into the city. During the past decade there was a dearth of new apartment buildings, leaving renters with few options to meet their high expectations for amenities and finishes.
Developers who might otherwise be building houses and condos are taking advantage of the opportunity. Jay Thompson, a senior vice president with Everest Real Estate Advisors, said there are plans to build more than 3,000 rental units in the downtown Minneapolis core and surrounding neighborhoods over the next several years.
Not all of them will get built, but the sheer numbers are an indication of deep and lasting demand.
Rental housing is one of the few bright spots in the construction industry these days. So far this year multifamily housing has represented more than a third of all construction activity in the Twin Cities, according to the Builders Association of the Twin Cities.
Rogers said that because of its location in a neighborhood with few development options, he isn't worried about the timing or the competition for the project at 29th and Lyndale.
"Those that are built the earliest and in the best locations are going to be the most successful," he said. "And we're banking on both of those factors."
Jim Buchta • 612-673-7376