Twin Cities apartment developers are filling units nearly as fast they can build them.
Although more than 3,000 new apartments were built in the metro area over the past year, the average vacancy rate barely budged, ending the year at just 2.5 percent, with average monthly rent rising 2.5 percent to $981, according to Marquette Advisors.
"It was another outstanding year to be an apartment owner in the Twin Cities, but if you're a renter you had to move quickly if you saw something you liked," said Jack Sipes, senior vice president of property management for Dominium, which owns and manages more than 5,000 apartments in the Twin Cities and more than 23,000 units nationwide.
With the economy on the mend and housing in short supply, the Twin Cities has consistently rated as one of the nation's tightest rental markets. That demand is being driven by an influx of renters from outside the area who are moving here for jobs and by an increase in the number of renters by choice. In addition, there has been a dearth of new apartment construction for much of the past two decades.
"This is a very strong apartment market, probably our strongest across the country," said Sipes. "When we have a vacancy, we lease quickly at or above what the person before was paying."
The report, which surveys more than 110,000 apartments in mostly large complexes across the metro area, shows that the rental market is especially tight for low- and moderate-income renters.
All eyes, however, are on downtown Minneapolis, which has been the epicenter of a recent building boom. Across the region, more than 3,100 new units were built last year, half of them in downtown.
The abundance of new projects, mostly high-end buildings where a studio apartment can easily rent for more than $1,000 a month, has created growing concern that the market is overbuilt and headed toward saturation. While the average downtown vacancy rate doubled to 4 percent at the end of 2013, the market is expected to easily absorb the 1,200 additional units that will come online this year.