Minneapolis-St. Paul Multifamily Investment Forecast
Suburbs Favored by Tenants as Preferences Shift;
Rent Control in St. Paul Shakes Up Investment Landscape
Pandemic-era trends reveal transformation of leasing decisions. From the beginning of 2020 through the third quarter of last year, the suburbs were responsible for nearly 82 percent of net absorption. This is up notably from the 68 percent suburban share logged during the same length period prior to 2020. Several factors are influencing renter preferences and funneling more demand to outlying areas. Many residents are seeking larger units in more spacious communities, coinciding with civil unrest in urban districts that could also be impacting decision making. At the same time, remote and hybrid work schedules are making commute times less relevant to some renters. Suburban submarkets including South St. Paul-Eagan, East St. Paul and Burnsville-Apple Valley had low-2 percent vacancy rates late last year amid declining availability. Conditions should remain tight in these areas as demand trends persist and the three submarkets combine for less than 25 percent of the 2022 pipeline. Conversely, almost 1,600 new rentals are headed to Downtown Minneapolis-University, where vacancy held above 5 percent in 2021.