For example, the Nic on Fifth and LPM Apartments are both set to be completed by the end of the year with a combined 600-plus luxury apartments that will hit the market about the same time. Yet the 28-story apartment tower proposed by Ryan isn’t expected to be completed until 2017.
“Some are cautious, others are still thinking everything is fine,” said Bujold. “This year is going to be a telling year as to which way we’re going to progress. We’ll either fill up all the buildings and continue to move along, or we’ll see vacancy rates rise.”
Demand for rental housing is also likely to be bolstered by the growing shortage of for-sale condominiums in downtown. At the current sales pace, there are now enough listings to last only two months, according to the Regional Multiple Listing Service, and only one new condo building is under construction. Still a few months away from completion, Stonebridge Lofts in the Mill District is already 75 percent sold out. Facing so few options, many would-be condo buyers will be forced to rent instead.
Hotel construction reviving
As the apartment boom surged, the hotel market began picking up in small, but meaningful, ways. Currently there are 27 hotels in downtown Minneapolis with 7,030 rooms, according to Meet Minneapolis. About 1,338 rooms have been added since 2006.
Construction of new hotels dried up in the economic downturn, but there’s evidence now of a resurgence, as several projects take root. Among them is Mortenson’s Hampton Inn & Suites project — 211 rooms on what is now a surface parking lot near the First Avenue nightclub. An entity associated with Mortenson recently closed on the purchase of the property for $2.86 million.
An affiliate of Sioux Falls, S.D.-based U.S. Hotel & Resort Management is renovating the former Nate’s Clothing building at 401 1st Av. N. in the Warehouse District in a $11 million project. And there’s talk of the 12-story Plymouth Building at the corner of S. 6th Street and Hennepin Avenue being renovated by Minneapolis-based Heartland Realty Investors into an upscale Conrad hotel, although the company would not comment.
Talk that surfaced about a year ago regarding a 1,000-room hotel near the convention center on the Century Plaza site, now owned by Hennepin County, has not been revived, said David Lawless, director of budget and finance for the county. First, the county must move employees out of the building, he said.
One issue with the Downtown East area from a hotel standpoint is that it is relatively remote from the city’s core, although it will be connected by skyway.
“It is far afield for a certain type of demand — it’s a long ways from the convention center, and a pretty good distance from office core,” said Steve Sherf, president of Hospitality Consulting Group in Excelsior. “I’m a little concerned that it’s far from the action, although it will do well during days when there are events.”
Hotel occupancy rates have recovered downtown since the recession when they had dipped to about 59 percent — in 2013, they were 71.8 percent, according to Smith Travel Research.
“Another 300 rooms is not huge, but it’s still a substantial amount, especially given growth down there,” Sherf said.
Janet Moore • 612-673-7752 Jim Buchta • 612-673-7376