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MARKET VIEWPOINTTWIN CITIES MULTIFAMILY MARKET2019-2020
THE 2010s IN REVIEW:A TRANSFORMATIVE DECADE
Mortgage banking for multifamily housing, senior housing, student housing, and healthcare facilities
INTRODUCTION 1TWIN CITIES MULTIFAMILY SUBMARKETS 2NEW MULTIFAMILY BUILDING TYPES IN THE TWIN CITIES 32019 DEVELOPMENT PATTERNS BY SUBMARKET 4-72019 NEW PRODUCT PRICING TRENDS 8-10THE 2010s: A TRANSFORMATIVE DECADE FOR HOUSING 11MAP: 2010s DECADE – SUBURBAN DEVELOPMENT LOCATIONS 12-13MAP: 2010s DECADE – CENTRAL CITY DEVELOPMENT LOCATIONS 14-152010s DECADE TRENDS: CONTINUED MARKET EXPANSION 16 PRODUCT DIVERSIFICATION 17 TRANSIT-ORIENTED DEVELOPMENT BOOM 18 CHANGING DEFINITION OF SUITABLE SITES 19 ESCALATING PRICES FOR NEW PRODUCT 20 WORSENING SHORTAGE OF AFFORDABLE HOUSING 21MARKET OUTLOOK: 2020 22ABOUT DOUGHERTY MORTGAGE 23REPRESENTATIVE TRANSACTIONS 24-25
ACKNOWLEDGEMENTSReport Author: Thomas G. O’Neil, Vice President of Market Development, Dougherty Mortgage LLCResearch Assistant: Madeline Quickstad, Administrative Assistant, Dougherty Mortgage LLCReport Layout: Shannon Churchward, Churchward Design This report is provided for educational purposes for our clients and business associates. The unauthorized use of this work is prohibited. © 2020 Dougherty Mortgage LLC. DISCLAIMERThis report assesses the 7-county Twin Cities multifamily market as of fourth quarter 2019 using data from numerous sources. Projects analyzed generally contain 20 or more units. Market pricing calculations reflect quoted/asking rents before concessions and exclude rents that are restricted per recorded covenants. The information contained herein has been obtained from sources deemed but not guaranteed to be reliable. Accuracy and completeness are not guaranteed. Past performance does not guarantee future results. Dougherty Mortgage LLC warns against using this report to make site-specific development decisions without a separate and full review of all available information by professional analysts. For this report, affordable rental housing includes new, permanent units with rent and income restrictions, built by private or public entities for general-occupancy/families and targeted populations (e.g. long-term homeless, homeless youth, persons with mental health or chemical dependency challenges, persons with disabilities, and other supportive housing populations). Senior/age restricted units are not included in this report. This report does not tally shelter beds or other short-term accommodations or affordable preservation units. DATA SOURCESMarket data in this report comes from a variety of widely-available sources including project web sites, rental clearinghouse sites, industry reports, accounts from newspapers and other media outlets, leasing personnel, building managers, and other real estate professionals. Economic data was provided by the Bureau of Labor Statistics. Minnesota Geospatial Commons provided base-level GIS files for analysis. Vacancy and rent growth data came from Cushman & Wakefield and Class-A cap rates were provided by CBRE. The Twin Cities Metro Area map was provided by the Met Council. PHOTO CREDITSPhotos in this report are from Dougherty Mortgage LLC unless otherwise noted. Cover images, counterclockwise from upper left: Loden SV (Greco), Aria Apartments (forrent.com), Grand Central Flats (Dominium). Photo on page above: Wells Fargo Center (Mulad, via Wikipedia). Page 3: Hub Minneapolis (Greystar), Residences at 1700 (apartmentfinder.com), Greenway Terrace (Aeon), Schmidt Artist Lofts (McGhiever), Sundance at Settler’s Ridge (Timberland Partners). Page 17: Nolo Flats (Solhem Companies), Nic on 5th (Egan Company), Reserve at Arbor Lakes (Doran Companies), Prior Crossing (Beacon Interfaith Housing Collaborative), The Grainwood (Dominium). Page 19: 66 West (UrbanWorks Architecture), Millennium on 66th (ESG Architecture and Design), Aria Edina (apartments.com), Onyx Edina (Matt M. Johnson).
TABLE OF CONTENTS
Market ViewpointTwin Cities Multifamily Market 2019-20
Dougherty Mortgage LLC90 South Seventh Street Suite 4300Minneapolis, MN 55402612-317-2100 www.doughertymarkets.com
For more information about this report, please contact: Thomas G. O’Neil Dougherty Mortgage LLC 612-317-2122 [email protected]
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 1
AS EXPECTED, 2019 PUT A BIG EXCLAMATION POINT ON A TRANSFORMATIVE DECADE FOR MULTIFAMILY HOUSING IN THE TWIN CITIES. For the third year in a row, production peaked last year with more than 6,900 new rental units delivered in 65 developments, excluding units in any type of senior rental housing. Despite the record production, the market is arguably stronger at the end of 2019 as market-rate deliveries were down significantly – 19% less or 1,200 fewer units – over 2018. Affordable units made up the difference, with a record year of production of 1,875 units. Demand for affordable housing in the Twin Cities is in the tens of thousands of units and any new projects entering the market will operate at or near 100% occupancy over the long term, thus adding stability to the market.
The multifamily market in the Twin Cities matured greatly over the past decade, demonstrated by growing production volumes, the spreading of new product over more cities/geographies, and product specialization. At decade’s end, some concentrated submarkets such as the U of M neighborhoods and Uptown appeared to be largely through the current development cycle, with slower growth expected in the 2020s. For the Twin Cities overall, however, there still should be significant growth potential as development further penetrates the outer suburban markets, which collectively added only about 13,100 units during the past decade. As this report discusses on page 11, multifamily production served only about 14% of new households added in the outer suburbs in the 2010s, leaving ample development opportunities in the current decade.
The Twin Cities multifamily market ended the decade with continued strong market fundamentals. The rental vacancy rate for stabilized properties increased only slightly during 2019, finishing the year at about 3.5%, while year-over-year rent growth was very strong at 5.8%. The unemployment rate remained low over the year, ending December at 3.0%, up just 0.2 percentage points from a year earlier. Strong apartment absorption, rising rents, and low unemployment
kept investor interest strong across the Twin Cities, and the year ended with cap rates for stabilized Class-A properties between 4.50% and 5.25%, depending on a central city or suburban location.
Renting continues to be a strong lifestyle option for many households, especially younger mobile professionals and empty nesters seeking to downsize and capture long-held home equity. And given the low for-sale inventory and the rapid increases in home sale prices in the Twin Cities, it is still often cheaper to rent than to buy, especially in the built-up portions of the metro area.
This year’s Market Viewpoint report looks in detail at the decade of the 2010s and outlines key trends that we observed. We hope you find this analysis helpful. We look forward to working with you in 2020.
INTRODUCT ION
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Num
ber o
f Uni
ts
Source: Dougherty Mortgage LLCIncludes market-rate and affordable units for general-occupancy or targeted populations. Excludes senior/age-restricted units.
Affordable
Market Rate
New Multifamily Units Delivered (Non Senior)2010 – 2019
Twin Cities Metro Area (7 Counties)
4,258 Units Ave./Yr.
Key Multifamily/Economic Indicators: YE 2019Twin Cities Metro Area
3.5% 5.8% 3.0% 4.50% – 5.25% Multifamily Year-Over-Year Unemployment Class-A Cap Rate Vacancy Rate* Rent Growth** Rate*** Range****
* Yardi** Cushman & Wakefield*** Bureau of Labor Statistics, US Department of Labor; 16-County MSA**** CBRE; stabilized properties
1 Downtown Minneapolis – the area within the I-94/ I-35W freeway ring, plus areas immediately adjacent that have a Downtown orientation, such as St. Anthony/East Bank Riverfront (centered on East Hennepin Avenue and University Avenue SE).
2 Minneapolis Uptown – the area in the broader Lake Street corridor, stretching from the West Lake Bde Maka Ska (formerly Lake Calhoun) district near Chowen Avenue, east to roughly Lyndale Avenue. Includes development within roughly ¼-mile north or south of Lake Street. The 29th Street Greenway is a key feature of this submarket.
3 U of M Neighborhoods – the area surrounding both banks of the Minneapolis campus, generally bounded by I-35W on the west, the Burlington Northern rail yards (north of TCF Bank Stadium) on the north, Malcom
This report divides the Twin Cities into 11 multifamily submarkets, each with unique characteristics. Concentrated development in the downtowns of Minneapolis and St. Paul, and in the Uptown area of Minneapolis, has helped transform key cultural and employment districts into desirable housing locations. Similarly, key nodes in select first-ring suburbs and inner-city neighborhoods have seen strong amounts of multifamily investment in recent years as the market acknowledges the wide array of attractions and short commutes offered in the ‘50s and ‘60s development ring. In addition, private investment in student-oriented housing has created a unique rental submarket in the immediate neighborhoods surrounding the University of Minnesota campus in Minneapolis.
Avenue SE on the east, and I-94 on the south. Includes all or most of the student-oriented neighborhoods of Marcy-Holmes (includes Dinkytown), University, Prospect Park (includes Stadium Village), and Cedar-Riverside.
4 Minneapolis Neighborhoods – the remainder of the City outside of Downtown, Uptown, and the University of Minnesota neighborhoods.
5 Downtown St. Paul – the area bounded by the I-94/I-35E freeway loop between roughly Kellogg Boulevard/Chestnut Street on the west and Lafayette Road/Highway 52 on the east. Includes the Upper Landing housing district and the West Side Neighborhood (north of Plato Boulevard) south of the Mississippi River.
6 St. Paul Neighborhoods – the remainder of the City outside of Downtown.
7 First-Ring Suburbs – includes 23 inner-ring suburbs surrounding Minneapolis and St. Paul. These areas were mostly developed in the 1950s and 1960s and have been the focus of significant redevelopment activity in recent years.
8 Southwest Suburbs – includes all suburbs south of I-394/US 12 and west of I-35W/I-35. Includes Bloomington and all of Scott and Carver Counties.
9 Northwest Suburbs – includes all suburbs north of I-394/US 12 and west of the Mississippi River, plus the western half of Anoka County (Coon Rapids, Andover, Ramsey, Anoka, etc.)
10 Southeast Suburbs – the suburbs south of I-94 and St. Paul, east of I-35W/I-35 and southeast of the Minnesota River. Includes all of Burnsville and Lakeville.
11 Northeast Suburbs – generally covers the suburbs east of the Mississippi River and north of I-94, excluding the western half of Anoka County.
§̈¦94
§̈¦35E§̈¦35W
§̈¦94
§̈¦94
§̈¦694
§̈¦35W
§̈¦35
§̈¦694
§̈¦394
§̈¦494
§̈¦494
§̈¦35
§̈¦35E
St. Paul
Hugo
Eagan
Blaine
Scandia
Columbus
Minneapolis
Afton
Grant
Lakeville
Andover
East Bethel
May Twp.
Nowthen
Orono
Corcoran
Plymouth
Ramsey
Rogers
Ham Lake
Woodbury
Medina
Dayton
Oak Grove
Lino Lakes
Forest Lake
Rosemount
Eureka Twp.
Bloomington
Benton Twp.
Eden Prairie
Shakopee
Helena Twp.
Maple Grove
Minnetrista
Linwood Twp.
Douglas Twp.
Burnsville
Cottage Grove
Edina
Empire Twp.
Camden Twp.
Dahlgren Twp.
Hampton Twp.
Marshan Twp.
Independence
Vermillion Twp.
Hollywood Twp.
Lake Elmo
Minnetonka
Chaska
Watertown Twp.
Belle Plaine Twp.
Waconia Twp.
Cedar Lake Twp.
St. Francis
Savage
Denmark Twp.
New Market Twp.
Castle Rock Twp.Blakeley Twp.
Greenfield
Sand Creek Twp.
Brooklyn Park
Greenvale Twp.
Laketown Twp.
Young America Twp.
Chanhassen
Coon Rapids
Prior Lake
Spring Lake Twp.
Ravenna Twp.
Inver Grove Heights
Fridley
Maplewood
Roseville
Credit River Twp.
Apple Valley
Victoria
Hastings
Oakdale
Hancock Twp.
Farmington
Sciota Twp.
San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Champlin
Stillwater
St. Lawrence Twp.
Randolph Twp.
St. Louis Park
Golden Valley
Richfield
North Oaks
Shorewood
Mound
Baytown Twp.
West Lakeland Twp.
Mendota Heights
Wayzata
Waterford Twp.
ArdenHills
Crystal
White Bear Twp.
CarverJackson Twp.
BrooklynCenter
NewBrighton White
BearLake
VadnaisHeights
Belle Plaine
Waconia
NewHope
Mahtomedi
Hopkins
Jordan
Newport
SouthSt. Paul
WestSt. Paul
Fort Snelling
Deephaven
Little Canada
Lakeland
MoundsView Dellwood
St. Paul Park
Hanover
Watertown
Robbinsdale
Centerville
Marine on St. Croix
Mayer
Cologne
NorthSt. Paul
Bayport
Columbia Heights
Tonka Bay
St. AnthonyOak Park Heights
Miesville
Coates
New Prague
Elko New Market
Circle Pines
Falcon Heights
Bethel
Hampton
Northfield
SunfishLake
Spring Lake Park
Grey Cloud Island Twp.
Osseo
Woodland
Lilydale
Gem Lake
Randolph
Norwood Young America
Vermillion
Excelsior
Long Lake
Greenwood
Maple Plain
Minnetonka Beach
New Germany
St. Bonifacius
Pine Springs
Lexington
Spring ParkLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
MedicineLake
St. Marys Point
Hamburg
New Trier
Birchwood VillageHilltop
Landfall
Willernie
§̈¦94
§̈¦35E§̈¦35W
§̈¦94
§̈¦94
§̈¦694
§̈¦35W
§̈¦35
§̈¦694
§̈¦394
§̈¦494
§̈¦494
§̈¦35
§̈¦35E
St. Paul
Hugo
Eagan
Blaine
Scandia
Columbus
Minneapolis
Afton
Grant
Lakeville
Andover
East Bethel
May Twp.
Nowthen
Orono
Corcoran
Plymouth
Ramsey
Rogers
Ham Lake
Woodbury
Medina
Dayton
Oak Grove
Lino Lakes
Forest Lake
Rosemount
Eureka Twp.
Bloomington
Benton Twp.
Eden Prairie
Shakopee
Helena Twp.
Maple Grove
Minnetrista
Linwood Twp.
Douglas Twp.
Burnsville
Cottage Grove
Edina
Empire Twp.
Camden Twp.
Dahlgren Twp.
Hampton Twp.
Marshan Twp.
Independence
Vermillion Twp.
Hollywood Twp.
Lake Elmo
Minnetonka
Chaska
Watertown Twp.
Belle Plaine Twp.
Waconia Twp.
Cedar Lake Twp.
St. Francis
Savage
Denmark Twp.
New Market Twp.
Castle Rock Twp.Blakeley Twp.
Greenfield
Sand Creek Twp.
Brooklyn Park
Greenvale Twp.
Laketown Twp.
Young America Twp.
Chanhassen
Coon Rapids
Prior Lake
Spring Lake Twp.
Ravenna Twp.
Inver Grove Heights
Fridley
Maplewood
Roseville
Credit River Twp.
Apple Valley
Victoria
Hastings
Oakdale
Hancock Twp.
Farmington
Sciota Twp.
San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Champlin
Stillwater
St. Lawrence Twp.
Randolph Twp.
St. Louis Park
Golden Valley
Richfield
North Oaks
Shorewood
Mound
Baytown Twp.
West Lakeland Twp.
Mendota Heights
Wayzata
Waterford Twp.
ArdenHills
Crystal
White Bear Twp.
CarverJackson Twp.
BrooklynCenter
NewBrighton White
BearLake
VadnaisHeights
Belle Plaine
Waconia
NewHope
Mahtomedi
Hopkins
Jordan
Newport
SouthSt. Paul
WestSt. Paul
Fort Snelling
Deephaven
Little Canada
Lakeland
MoundsView Dellwood
St. Paul Park
Hanover
Watertown
Robbinsdale
Centerville
Marine on St. Croix
Mayer
Cologne
NorthSt. Paul
Bayport
Columbia Heights
Tonka Bay
St. AnthonyOak Park Heights
Miesville
Coates
New Prague
Elko New Market
Circle Pines
Falcon Heights
Bethel
Hampton
Northfield
SunfishLake
Spring Lake Park
Grey Cloud Island Twp.
Osseo
Woodland
Lilydale
Gem Lake
Randolph
Norwood Young America
Vermillion
Excelsior
Long Lake
Greenwood
Maple Plain
Minnetonka Beach
New Germany
St. Bonifacius
Pine Springs
Lexington
Spring ParkLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
MedicineLake
St. Marys Point
Hamburg
New Trier
Birchwood VillageHilltop
Landfall
Willernie
ANOKA
WASHINGTON
HENNEPINRAMSEY
CARVER
SCOTT
DAKOTA
´ 8 0 84 Miles
Downtown MinneapolisDowntown St. PaulFirst Ring SuburbsMinneapolis NeighborhoodsSt. Paul NeighborhoodsUniversity of Minnesota NeighborhoodsUptownNortheast SuburbsNorthwest SuburbsSoutheast SuburbsSouthwest Suburbs
Twin Cities Apartment Submarkets
2 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
TWIN CITIES MULTIFAMILY SUBMARKETS
High-rise Construction (8+ Stories Above Ground)
• Concrete and/or steel construction; typically 150 to 350 units, averaging 18 stories.
• Found mostly in Downtown Minneapolis, but buildings have also been constructed in the U of M neighborhoods, and select closer-in suburbs.
• Accounted for 12% of new apartment units (~4,900) completed last decade.
Mid-rise Construction (4 to 7 Stories)
• Generally consists of 1-2 concrete base level floors with 4-5 wood-frame floors above.
• Vast majority of new apartment supply in the Twin Cities; 68% of new units (~28,700) in the last decade.
Low-rise Construction (< 4 Stories)
• Wood-frame; typically located in the suburbs or moderately-priced central-city areas.
• Generally smaller in project size with about 70-75 units on average.
• Accounted for approximately 11% of new units delivered last decade (~4,700).
Gut Rehab Conversions of Historic Properties, Old Warehouses, and Other Buildings
• Found almost exclusively in Downtown St. Paul and the North Loop neighborhood in Downtown Minneapolis.
• Thirty conversions provided about 7% of all new units (~3,200) delivered last decade.
Rental Townhomes & Detached Homes
• Two-story wood-frame projects; average project size is 45-50 units.
• Found almost exclusively in newer suburbs and exurban cities; includes ten affordable projects in Dakota County.
• Represented only 2% of new rental supply delivered last decade, or just over 1,000 units.
Over the last decade, new apartment units in the Twin Cities were delivered in five main types of building construction:
NEW MULTIFAMILY BUILDING TYPES IN THE TWIN CITIES
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 3
Hub Minneapolis 26 stories
Residences at 1700 6 stories
Greenway Terrace 3 stories
Schmidt Artist Lofts
Sundance at Settler’s Ridge
Downtown Minneapolis – More than 1,120 non-senior units were delivered in 2019 in Downtown Minneapolis. While this total fell about 17% below 2018’s high level of production, it still was one of the strongest totals for any year last decade.
Highlights:
• Six buildings came online in five neighborhoods last year. Only Elliot Park failed to see a new project opening.
• Two-thirds of new units opened in high-rise towers, including City Club (307 units; 17 stories), Ironclad (166 units; 14 stories) and Rafter (282 units; 28 stories).
• Nearly 280 new affordable rental units opened in three buildings between the 183-unit 1500 Nicollet complex, the 72-unit Great River Landing, and The Vicinity, a mixed-income building with 24 affordable units among 94 market-rate units. Great River Landing is unique in its provision of support services for people who were formerly incarcerated.
Minneapolis Uptown – Uptown continued its two-year trend of low production last year with just two projects opening, for a total of 40 units. Over the last decade, Uptown showed a boom-and-bust development pattern with one to two years of high production of 400-550 units mixed in with years of low activity of only 50-100 units.
Highlights:
• Lander Group opened Zeo, a 25-unit boutique apartment building at 32nd and Hennepin.
• North Bay Cos. opened Prox 31, a 15-unit infill project in the Cedar Isles Dean area, northwest of Lake Bde Maka Ska.
• Fitting with the boom-and-bust pattern, Uptown is expected to see 812 new units open in five projects in 2020. Two large projects – 200-unit Lakehaus at 3100 Lake Street and 317-unit Daymark Uptown on the former Sons of Norway site – will once again test market depth in the broader Uptown area.
U of M Neighborhoods – In 2019, the U of M submarket saw delivery of 485 units in seven projects. This total was just above the ten-year average yearly production (474 units) for this submarket.
Highlights:
• Two of last year’s new projects are mixed-income properties in the Prospect Park neighborhood. Green on 4th delivered 66 affordable units along with 177 market-rate units, and The Louis, from Aeon, opened 63 affordable and seven market-rate units.
• Five new projects in 2019 ranged from just 7 to 85 units, representing infill and redevelopment in Marcy Holmes, Dinkytown and the West Bank neighborhoods. Among these were Archer (43 units), Lume (25 units) and Luna (85 units).
• Deliveries in 2020 could hit roughly 680 units if all five projects under construction now are completed on schedule.
MULTIFAMILY DEVELOPMENT PATTERNSDowntown Minneapolis I Minneapolis Uptown I U of M Neighborhoods
4 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1,400
1,200
1,000
800
600
400
200
0
Num
ber o
f Uni
ts
Affordable
Market Rate
DOWNTOWN MINNEAPOLISNew Units Delivered 2010 – 2019
807 Units Ave./Yr.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
MINNEAPOLIS UPTOWNNew Units Delivered 2010 – 2019
245 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1,200
1,000
800
600
400
200
0
Num
ber o
f Uni
ts
Affordable
Market Rate
U OF M NEIGHBORHOODSNew Units Delivered 2010 – 2019
474 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
Minneapolis Neighborhoods – Just over 650 non-senior rental units were delivered in 2019 throughout the neighborhoods in Minneapolis (outside of the U of M neighborhoods and Uptown). This was clearly the highest total of the decade, and the culmination of a continued upward trend over the last ten years.
Highlights:
• Nine buildings came online in six neighborhoods with just under half (306 units) coming from four buildings in Northeast.
• The average project size in 2019 – at 72 units – was remarkably similar to the decade-long average of 74 units. This size reflects the constraints of redevelopment and infill on sites in the central city.
• About 150 affordable units opened in the Minneapolis neighborhoods last year, a bit higher than the annual average of 129.
• Deliveries are expected to skyrocket to nearly 1,400 new units in 2020 in the Minneapolis neighborhoods with 14 projects currently under construction.
Downtown St. Paul – Downtown St. Paul showed an inconsistent pattern last decade, but it ended with peak production of 618 new rental units in six developments in 2019.
Highlights:
• Two projects in 2019 more than doubled the affordable production total for the decade in Downtown St. Paul: Press House, a 144-unit conversion of the former Pioneer Press building, and the second phase of the large Dorothy Day development project from Catholic Charities. This latter project offers 177 permanent housing units with supportive services for very low-income persons.
• All six developments that opened last year Downtown are within ½-mile from a Green Line LRT station; all are considered transit-oriented developments.
• Downtown St. Paul has been the undisputed leader in the conversion of historic warehouses and offices to rental apartments. Last year, four of the six new projects fell into this category: Press House (114 units), Commission House (26 units), The Jax (48 units), and R7 Lofts (48 units).
St. Paul Neighborhoods – The St. Paul neighborhoods saw peak production in 2019 with seven projects delivering 666 units in four neighborhoods including Battle Creek, a long overlooked area.
Highlights:
• Four projects in the St. Paul neighborhoods brought 431 affordable units to market, the largest such total of any submarket last year. Dominium built the largest of these with the 217-unit Union Flats project in the St. Anthony Midway area. Last decade, more affordable production occurred in the St. Paul neighborhoods (1,233 units) than all other submarkets except the Minneapolis neighborhoods (1,291 units).
• Market-rate openings last year in St. Paul’s neighborhoods included The Grove at 246 Snelling Avenue (118 units) and Capital View Apartments (109 units) along Old Hudson Road on the far eastern side of the city, an area with no new rental development otherwise.
• Deliveries in 2020 could hit roughly 600 units if all four projects under construction now are completed on schedule. Two of the projects are located on Snelling Avenue in the burgeoning district near the new Allianz soccer stadium.
MULTIFAMILY DEVELOPMENT PATTERNSMinneapolis Neighborhoods I Downtown St. Paul I St. Paul Neighborhoods
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
700
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
ST. PAUL NEIGHBORHOODSNew Units Delivered 2010 – 2019
295 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
700
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
DOWNTOWN ST. PAULNew Units Delivered 2010 – 2019
239 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
700
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
MINNEAPOLIS NEIGHBORHOODSNew Units Delivered 2010 – 2019
349 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
First-Ring Suburbs – Delivery of new non-senior rental units in the first-ring suburbs of the Twin Cities in 2019 exceeded 1,000 units, only the second time that happened last decade. Seven projects totaling 1,063 units opened in Edina, Richfield, Columbia Heights, Roseville, South St. Paul, and Mendota Heights. The significant shift toward the east side of the metro represented a further maturing of the market, with developers exploiting opportunities in areas overlooked during the previous years of the decade.
Highlights:
• Edina led all first-ring suburbs with 286 units opening in the Southdale area and at 50th & France. This latter district saw the opening of 101-unit Nolan Mains, only the second new housing project in the broader 50th & France district (including adjacent Minneapolis).
• Traditionally less active cities such South St. Paul (67 units), Columbia Heights (148 units) and Mendota Heights (70 units) also added new non-senior rental units last year. Richfield saw a very large project open in The Chamberlain, a 316-unit mixed-income project with 283 newly-constructed and 33 renovated units.
• Another strong year is forecast for 2020, with seven projects under construction in the first-ring suburbs, totaling 1,160 units. Projects are well spread out across the Twin Cities: Golden Valley, St. Louis Park, Robbinsdale, Richfield, Newport, Maplewood, and Edina each have a project expected to open.
Southwest Suburbs – The southwest suburbs hit near-peak production in 2019 with 1,040 new non-senior units delivered, slightly below the high mark of 1,054 new units opened in 2015. This continued a five-year stretch of nearly 800 units delivered on average per year, third highest in the Twin Cities behind Downtown Minneapolis (907 units/year average) and the first-ring suburbs (870 units/year average).
Highlights:
• New projects were spread out among seven cities in the southwest suburbs and included two large transit-oriented developments in the future Green Line LRT extension corridor: 332-unit RiZe at Opus Park adjacent to the future Opus station platform in Minnetonka, and 222-unit Elevate at Southwest Station at the terminal station platform in Eden Prairie.
• Demonstrating the outward push of rental development in the southwest, projects opened last year in Chanhassen (130 units) Chaska (117), Prior Lake (50), Savage (54), and Shakopee (57).
• As with the first-ring suburbs, the southwest suburbs have a very large number of units that are planned, approved or under construction for delivery over the next few years. Dougherty Mortgage is tracking nine projects with roughly 1,600 units that are under construction and could open in 2020. Given the low level of production compared to household growth last decade in the southwest, higher numbers of new units should be absorbed well in this expansive submarket.
MULTIFAMILY DEVELOPMENT PATTERNSFirst-Ring Suburbs I Southwest Suburbs
6 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1,200
1,000
800
600
400
200
0
Num
ber o
f Uni
ts
Affordable
Market Rate
FIRST-RING SUBURBSNew Units Delivered 2010 – 2019
539 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
1,200
1,000
800
600
400
200
0
Num
ber o
f Uni
ts
Affordable
Market Rate
SOUTHWEST SUBURBSNew Units Delivered 2010 – 2019
484 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
Northwest Suburbs – In 2019, production dropped to 392 non-senior units delivered in the northwest suburbs, a solid year in the historical context, but well below the peak years of 2017 and 2018.
Highlights:
• Ironwood Apartments in New Hope (183 units) led all projects last year, followed by Vincent Woods I in Rogers (84 units) and Bottineau Ridge phase II in Maple Grove (50 affordable units).
• An additional project – Nova at Riverdale Station – opened next to the Riverdale Northstar commuter rail station in Coon Rapids. It is the 71-unit initial phase of a much larger TOD project being developed by Sherman Associates.
• New product deliveries are expected to stay at virtually the same level in 2020 as in 2019, with 391 units under construction and planned to open. Another phase of The Reserve at Arbor Lakes will add 123 units, while a second phase of Sherman Associates’ Riverdale station project will bring 184 market-rate units. Finally, Vincent Woods II will open with 84 more units in Rogers.
Southeast Suburbs – After being the lowest-producing submarket from 2010 through 2014, the southeast suburbs rallied to become a notable producer over the past five years. In four of the past five years, this submarket saw delivery of 400 or more units, or more than 2,300 over five years. Following a record 828 new units in 2018, deliveries in 2019 in the southeast suburbs dropped back to 423 units in four projects.
Highlights:
• Projects opened in Eagan (183 units), Lakeville (120 units), Hastings (88 units), and Rosemount (32 units). All were market-rate properties, with three being low-rise projects of two or three stories above ground.
• No new affordable projects opened in the southeast suburbs last year, following the trend from 2018. Conversely, over the first eight years of the last decade, the southeast produced an average of 50 affordable units per year.
• Deliveries in 2020 are expected to skyrocket to 1,400+ units as twelve projects are under construction in seven southeastern cities. This includes multiple projects in Apple Valley, Burnsville, Rosemount, and Woodbury.
Northeast Suburbs – Last decade, the northeast submarket produced the second-lowest number of units among the five suburban submarkets. The region has many smaller cities in the first and second rings of development around St. Paul, and projects tend to be slightly smaller in size than the average new rental project in the Twin Cities.
Highlights:
• In 2019, the northeast suburbs delivered roughly 400 units, a solid total for this submarket. Five cities saw new projects, including far-flung East Bethel with a 68-unit project.
• New market-rate products offered in the northeast are among the lowest-priced in the Twin Cities, with the overall submarket average asking rent for new projects never exceeding more than $1.75 per square foot in the 2010s. This low rent potential makes it more difficult to make projects financially feasible in the northeast suburbs.
MULTIFAMILY DEVELOPMENT PATTERNS Northwest Suburbs I Southeast Suburbs I Northeast Suburbs
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 7
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
800
700
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
NORTHWEST SUBURBSNew Units Delivered 2010 – 2019
309 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
900
800
700
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
SOUTHEAST SUBURBSNew Units Delivered 2010 – 2019
256 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
600
500
400
300
200
100
0
Num
ber o
f Uni
ts
Affordable
Market Rate
NORTHEAST SUBURBSNew Units Delivered 2010 – 2019
262 Units Ave./Yr.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
Asking Rents in the Twin CitiesDougherty Mortgage analyzed 4th quarter 2019 pricing data at 121 “newer” market-rate projects (opened in 2017 or after) throughout the 7-county Twin Cities Metro Area (table at right). The analysis includes a survey of asking rents before concessions or discounts, as quoted by building owners or representatives. The survey summarizes the rent structure for 14,824 market-rate units delivered since the start of 2017, including roughly 240 units that opened just after the start of 2020. It is important to note that actual, achieved rents at projects could vary considerably from the asking rents included in this survey.
The overall asking rent for newer, market-rate apartments in the Twin Cities increased to $2.24 per-square-foot (psf) in 4th quarter 2019, a big jump over the $2.15 psf figure a year earlier. Each submarket showed a price gain, however the six submarkets in Minneapolis and St. Paul far outpaced the five suburban submarkets. It is important to remember that price changes in a given submarket might be driven more by the opening of new projects than by price changes at existing projects.
Prices Are a Function of Geography: From the Urban Core OutwardThe 4th quarter 2019 survey revealed a clear geographic pattern of declining prices for newer units as submarkets become more distant from the urban core. We identified four tiers in the Twin Cities. The price difference between the top and bottom tiers is substantial; between 39% and 55%.
• First tier: highly-concentrated submarkets at the center of the Twin Cities – Downtown Minneapolis, the U of M neighborhoods, and Uptown – about $2.70 psf average.
• Second tier: the broader neighborhoods of Minneapolis and St. Paul plus Downtown St. Paul – $2.39 to $2.43 psf average.
• Third tier: the first-ring suburbs at $2.14 psf average.
• Fourth tier: the outer suburbs and exurban cities at $1.75 to $1.93 psf average.
There can be significant pricing variation from project to project in a given submarket. However, the general pattern discussed above reflects benefits more likely to be found as one moves into the urban core: proximity to job concentrations, prevalence of restaurants, cultural amenities and entertainment options, a broad array of transit options (including dedicated bikeways), and lively, walkable neighborhood settings.
Gaining Rent by Reducing Unit SizeAnother pattern affecting pricing is a move toward smaller sized units, especially in the urban core submarkets. With the exception of three-bedroom plans, unit sizes for newer product decreased across-the-board in the six central-city submarkets (chart above). In the cases of Uptown and the St. Paul neighborhoods, significant drops of 76 to 187 square feet occurred two or three floorplan types. The emergence of micro-unit buildings in these and other urban core areas are a main driver of this trend, but so is the overall trimming of unit sizes in all types of buildings. The reduction in unit size helped push rents for newer units in the urban core up by $0.04 to $0.27 psf on average last year, depending on the submarket.
The suburbs showed a different pattern last year. Four of five suburban submarkets saw average size increases in two or three floorplans types, and decreases in just one or two types. And where there were reductions, they were typically minimal (20 square feet or less). The first-ring suburbs showed the most pronounced pattern: average two- and three-bedroom unit sizes jumped by 52 and 196 square feet, respectively, as new projects came on-line with large, expensive units targeted at empty-nesters. Increasing unit sizes throughout the suburbs helped keep a lid on prices for newer units, with no submarket increasing by more than $0.04 psf in average rent last year.
8 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
NEW PRODUCT PRICING TRENDS
Submarket Pricing: Asking Rent Per Square FootNewer Market-Rate Units (Opened 2017 and After)
Twin Cities (7 Counties) | 4th Quarter 2019
Overall Survey Representation Rent/SF* Units Projects
Downtown Minneapolis $2.71 2,633 16 U of M Neighborhoods $2.70 1,447 9 Minneapolis Uptown $2.69 507 6 Minneapolis Neighborhoods $2.43 946 14 Downtown St. Paul $2.41 692 7 St. Paul Neighborhoods $2.39 508 6 First-Ring Suburbs $2.14 2,321 17 Southwest Suburbs $1.93 2,017 15 Northwest Suburbs $1.82 1,245 8 Southeast Suburbs $1.80 1,291 11 Northeast Suburbs $1.75 1,217 12
Total: Twin Cities $2.24 14,824 121 *Weighted Average
Source: Dougherty Mortgage LLC
Change in Unit Sizes by SubmarketNewer Market-Rate Units
Twin Cities (7 Counties) | 4th Quarter: 2019 vs. 2018
— Change in Average Unit SF — Rent/SF Studios 1BRs 2BRs 3BRs Change
Downtown Minneapolis (4) (38) (26) 52 $ 0.04 Minneapolis Uptown (34) (83) (181) (187) $ 0.16U of M Neighborhoods (27) (7) (23) 3 $ 0.13Minneapolis Neighborhoods (10) (12) (62) (83) $ 0.06St. Paul Neighborhoods (33) (76) (144) N/A $ 0.27Downtown St. Paul (21) (20) (1) 32 $ 0.20First-Ring Suburbs (7) 8 52 196 $ 0.04Southwest Suburbs (19) 5 1 (25) $ 0.04Northwest Suburbs (10) (5) (10) 0 $ 0.02Southeast Suburbs (29) 21 13 (13) $ 0.02Northeast Suburbs 9 (21) 20 69 $ 0.01
Source: Dougherty Mortgage LLC
NEW PRODUCT PRICING TRENDSPricing Structure by Twin Cities Submarket l 4th Quarter 2019
SUBMARKETS IN THE CENTRAL CITIES
Downtown Minneapolis $2.71 / sq. ft. average
U of M Neighborhoods $2.70/ sq. ft. average
Minneapolis Uptown $2.69 / sq. ft. average
Minneapolis Neighborhoods $2.43 / sq. ft. average
Downtown St. Paul $2.41 / sq. ft. average
St. Paul Neighborhoods $2.39 / sq. ft. average
Insufficient Data
$5,100
$1,198$2,204$1,135
$4,675
$1,820
$3,420
$3,500$1,495
$1,885 $3,698
$2,421$1,625 $2,378
$1,795 $3,134$5,300
$1,488
$1,055
$1,558$1,125
$1,367$1,496
$9,793
$1,316 $1,640
$1,145
$1,264
$4,997$3,456
$10,230
$1,499
$4,458$2,495
$4,750$3,508
$2,857$1,726
$1,925
$6,000
$2,800
$1,771
$2,007 $2,429$2,127 $3,120
$2,358
$1,793$1,650
$1,211 $1,373$1,195 $1,513
$1,050
$983
$1,297
$1,208$1,357
$1,025
$3,400$2,023
$3,085$2,779
$5,957$4,031$6,202
$1,200 $1,617$1,971
Legend: Low Asking Rent High Asking Rent
Denotes reduced scale due to space limitations
Average Asking Rent
2BR1BR
Studio
3BR
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 9
Downtown Minneapolis $2.71 / sq. ft. average
U of M Neighborhoods $2.70 / sq. ft. average
Minneapolis Uptown $2.69 / sq. ft. average
Minneapolis Neighborhoods $2.43 / sq. ft. average
Downtown St. Paul $2.41 / sq. ft. average
St. Paul Neighborhoods $2.39 / sq. ft. average
SUBMARKETS IN THE CENTRAL CITIES
Legend: Low Asking Rent
Denotes reduced scale due to space limitations
High Asking RentStudio
1BR
2BR
3BR
Average Asking Rent
NEW PRODUCT PRICING TRENDS Pricing Structure by Twin Cities Submarket l 4th Quarter 2019
NEW PRODUCT PRICING TRENDSPricing Structure by Twin Cities Submarket l 4th Quarter 2019
SUBURBAN SUBMARKETS
First-Ring Suburbs $2.14 / sq. ft. average
Southwest Suburbs $1.93 / sq. ft. average
Northwest Suburbs $1.82 / sq. ft. average
Southeast Suburbs $1.80 / sq. ft. average
Northeast Suburbs $1.75 / sq. ft. average
$2,099$2,999
$2,900
$3,357$2,403
$2,316$1,824
$1,804$2,100
$3,185$2,718
$1,566$1,390 $1,975
$2,345
$1,465
$6,585$2,830
$1,850
$2,528$1,700
$1,740 $2,426
$1,655
$2,195$1,378
$1,396$1,280
$1,370
$9,642
$1,549$1,399
$1,469$1,297$1,541
$1,582
$1,846$1,281
$1,358
$1,300
$1,180
$4,283$3,295$2,463
$3,882$2,225
$2,063$3,262
$850
$995$950
$1,100
$990
$1,165
$1,270$1,040
$1,025
$1,395
$1,045 $1,165
Legend: Low Asking Rent High Asking Rent
Denotes reduced scale due to space limitations
Average Asking Rent
2BR1BR
Studio
3BR
10 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
First-Ring Suburbs $2.14 / sq. ft. average
Southwest Suburbs $1.93 / sq. ft. average
Northwest Suburbs $1.82 / sq. ft. average
Southeast Suburbs $1.80 / sq. ft. average
Northeast Suburbs $1.75 / sq. ft. average
SUBURBAN SUBMARKETS
Legend: Low Asking Rent
Denotes reduced scale due to space limitations
High Asking RentStudio
1BR
2BR
3BR
Average Asking Rent
NEW PRODUCT PRICING TRENDS Pricing Structure by Twin Cities Submarket l 4th Quarter 2019
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 11
THE 2010s: A TRANSFORMATIVE DECADE FOR HOUSING
Multifamily production of roughly 42,600 non-senior units in the 2010s transformed the Twin Cities housing market in many ways. Overall, new multifamily development in the urban core provided a timely response to a recovering economy and employment gains, enabling larger numbers of households to live close to growing job concentrations. As well, new apartments provided a wide range of consumer choices in housing styles and locations for those uninterested in homeownership (or unable to buy). And at the city level, new rental projects helped give neighborhood identity to former commercial districts or mixed-use areas lacking housing options.
Looking back over the past decade of rental housing production in the Twin Cities gives us perspective on how the market has evolved and where it is likely to go in the 2020s. Among the things we learned:
• Many commercial districts in the suburbs could re-energize and modernize by adding new rental housing.
• Affordable housing shouldn’t be primarily a central-city phenomenon, but should be found much more often in the suburbs, home to 72% of the jobs and 76% of the households in the Twin Cities.
• Investment in transit infrastructure pays off for housing development; developers build near transit stations and renters see strong value in housing with nearby transit options.
• Micro units (efficiency and one-bedroom units of roughly 350 to 600 square feet) make economic sense to many younger renters in the central cities.
• The suburbs greatly lack new rental housing overall, and the potential to add housing outside of the urban core is strong (chart below). Only 13,109 new rental units were produced in the outer suburbs last decade while 97,000 new households were created.
1) Dougherty Mortgage Multifamily Database.
2) Metropolitan Council: Thrive MSP 2040 Forecasts, January 1, 2020 Update.
Rental Housing Production vs. Household Growth: 2010-2019Non-Senior Units
Twin Cities (7 Counties)
New Penetration Residual Non-Senior New Rate of New Housing Development Ring Rental Units1 Households2 Rental Units Demand
Urban Core:Central Cities & First Ring 29,473 55,396 53% 25,923Suburban & Exurban Ring:Southwest Suburbs 4,842 31,000 16% 26,158Northwest Suburbs 3,091 22,342 14% 19,251Southeast Suburbs 2,799 23,458 12% 20,659Northeast Suburbs 2,377 20,265 12% 17,888
Subtotal 13,109 97,065 14% 83,956Twin Cities Total 42,582 152,461 28% 109,879
Rental Housing Production by Submarket: 2010-2019Non-Senior Units
Twin Cities (7 Counties)
New Units DeliveredSubmarket Market Rate Affordable Total % of Total
Downtown Minneapolis 6,898 1,167 8,065 18.9%First-Ring Suburbs 4,621 768 5,389 12.7%Southwest Suburbs 4,259 583 4,842 11.4%U of M Neighborhoods 4,476 260 4,736 11.1%Mpls. Neighborhoods 2,201 1,291 3,492 8.2%Northwest Suburbs 2,318 773 3,091 7.3%St. Paul Neighborhoods 1,721 1,233 2,954 6.9%Northeast Suburbs 2,383 236 2,619 6.2%Southeast Suburbs 2,131 426 2,557 6.0%Uptown Minneapolis 2,240 208 2,448 5.7%Downtown St. Paul 1,825 564 2,389 5.6%
Total 35,073 7,509 42,582 100.0%
Source: Dougherty Mortgage Multifamily Database
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Corcoran
PlymouthMedina
Ramsey
Rogers
Woodbury
Ham Lake
Dayton Lino Lakes
Oak Grove
Bloomington
Rosemount
Forest Lake
Shakopee
Minnetrista
Benton Twp.
Eureka Twp.
Eden Prairie
Burnsville
Maple Grove
Helena Twp.
Edina
Linwood Twp.
Douglas Twp.
Cottage Grove
Empire Twp.
Hampton Twp.
Camden Twp.
Dahlgren Twp.
Marshan Twp.
Independence
Minnetonka
Vermillion Twp.
Hollywood Twp.
Chaska
Lake Elmo
Belle Plaine Twp.
Waconia Twp.
St. Francis
Cedar Lake Twp.
Savage
Denmark Twp.
New Market Twp.
Watertown Twp.
Greenfield
Castle Rock Twp.Blakeley Twp.
Sand Creek Twp.
Brooklyn Park
Prior Lake
Laketown Twp.
Greenvale Twp.
Chanhassen
Coon Rapids
Young America Twp.
Spring Lake Twp.
Maplewood
Fridley
Roseville
Apple Valley
Victoria
Hastings
Farmington
Sciota Twp.
Hancock Twp.San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Stillwater
Champlin
Richfield
Randolph Twp.
St. Louis Park
Golden Valley
North Oaks
Mound
Wayzata
Ravenna Twp.
Inver Grove Heights
Credit River Twp.
Oakdale
Waterford Twp.
Arden Hills
Crystal
St. Lawrence Twp.
Shorewood
Baytown Twp.
Carver
West Lakeland Twp.
MendotaHeights
White Bear Twp.
Waconia
New Brighton
BrooklynCenter
Mahtomedi
Belle Plaine
White Bear LakeVadnaisHeights
Hopkins
New Hope
Newport
Jordan
S St. PaulFort Snelling
W St. Paul
Little Canada
Deephaven Lakeland
Mounds View Dellwood
St. Paul Park
Jackson Twp.
Watertown
Hanover
Robbinsdale
Centerville
Mayer
Marine on St. Croix
Bayport
Cologne
N St. Paul
Columbia Heights
St. Anthony
Tonka Bay
Miesville
Oak Park Heights
Coates
Elko New MarketNew Prague
Circle Pines
Bethel
Falcon Heights
Northfield
Hampton
SunfishLake
SLP
Grey CloudIsland Twp.
Lilydale
Woodland
Osseo
GemLake
Randolph
Vermillion
NYA
Excelsior
Maple Plain
Long Lake
Greenwood
MB
St. Bonifacius
New Germany
Pine Springs
Lexington
SPLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
ML
St. Marys Point
Hamburg
New Trier
Hilltop
Landfall
D A K O T AD A K O T A
A N O K AA N O K A
H E N N E P I NH E N N E P I N
S C O T TS C O T T
C A R V E RC A R V E R
R A M S E YR A M S E Y
W A S H I N G T O NW A S H I N G T O N
µ 0 4 8 Miles
Affordable
Mixed Income
Market Rate
Future Stage Red Line Station Service Areas
Green Line LRT and Station Service Areas
Green Line Extension LRT and Station Service Areas
Northstar CR and Station Service Areas
Red Line BRT and Station Service Areas
Blue Line LRT and Station Service Areas
1
23
4 5 6
7
89
1011
12 13
14
15
SEE INSETPP. 14-15
District Projects Units
1 Ramsey “COR” 5 5032 610 & Zane / Brooklyn Park 1 4843 Arbor Lakes / Maple Grove 5 8284 Ridgedale Mall-Carlson Center / Minnetonka 3 3575 Hwys. 55/169 / Golden Valley-Plymouth 3 3746 West End / Golden Valley-St. Louis Park 5 9317 Elmwood-Excelsior / St. Louis Park 6 6688 Downtown Hopkins 3 4569 Southdale Mall District / Edina 5 93810 West I-494 Strip / Bloomington 5 94511 South Loop / Bloomington 1 39512 Egan Drive / Savage 3 36813 Downtown Apple Valley 6 80614 Eagan Town Center 4 33215 Downtown Forest Lake 5 389
Concentrations of Multifamily Development300+ New Units (Non-Senior)
Source: Dougherty Mortgage Multifamily Database
GEOGRAPHIC PATTERNS – The maps on pages 12-15 were designed to be simple with the intention of emphasizing new multifamily development across the Twin Cities. One dot represents one project, regardless of project size.
Housing Type: Blue Line LRT and Station Service Areas (½ mile)
Green Line LRT and Station Service Areas (½ mile)
Green Line Extension LRT and Station Service Areas (½ mile)
Northstar C.R. and Station Service Areas (½ mile)
Red Line BRT and Station Service Areas (½ mile)
Future Stage Red Line Station Service Areas (½ mile)
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Burnsville
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Linwood Twp.
Douglas Twp.
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Empire Twp.
Hampton Twp.
Camden Twp.
Dahlgren Twp.
Marshan Twp.
Independence
Minnetonka
Vermillion Twp.
Hollywood Twp.
Chaska
Lake Elmo
Belle Plaine Twp.
Waconia Twp.
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Cedar Lake Twp.
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Denmark Twp.
New Market Twp.
Watertown Twp.
Greenfield
Castle Rock Twp.Blakeley Twp.
Sand Creek Twp.
Brooklyn Park
Prior Lake
Laketown Twp.
Greenvale Twp.
Chanhassen
Coon Rapids
Young America Twp.
Spring Lake Twp.
Maplewood
Fridley
Roseville
Apple Valley
Victoria
Hastings
Farmington
Sciota Twp.
Hancock Twp.San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Stillwater
Champlin
Richfield
Randolph Twp.
St. Louis Park
Golden Valley
North Oaks
Mound
Wayzata
Ravenna Twp.
Inver Grove Heights
Credit River Twp.
Oakdale
Waterford Twp.
Arden Hills
Crystal
St. Lawrence Twp.
Shorewood
Baytown Twp.
Carver
West Lakeland Twp.
MendotaHeights
White Bear Twp.
Waconia
New Brighton
BrooklynCenter
Mahtomedi
Belle Plaine
White Bear LakeVadnaisHeights
Hopkins
New Hope
Newport
Jordan
S St. PaulFort Snelling
W St. Paul
Little Canada
Deephaven Lakeland
Mounds View Dellwood
St. Paul Park
Jackson Twp.
Watertown
Hanover
Robbinsdale
Centerville
Mayer
Marine on St. Croix
Bayport
Cologne
N St. Paul
Columbia Heights
St. Anthony
Tonka Bay
Miesville
Oak Park Heights
Coates
Elko New MarketNew Prague
Circle Pines
Bethel
Falcon Heights
Northfield
Hampton
SunfishLake
SLP
Grey CloudIsland Twp.
Lilydale
Woodland
Osseo
GemLake
Randolph
Vermillion
NYA
Excelsior
Maple Plain
Long Lake
Greenwood
MB
St. Bonifacius
New Germany
Pine Springs
Lexington
SPLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
ML
St. Marys Point
Hamburg
New Trier
Hilltop
Landfall
D A K O T AD A K O T A
A N O K AA N O K A
H E N N E P I NH E N N E P I N
S C O T TS C O T T
C A R V E RC A R V E R
R A M S E YR A M S E Y
W A S H I N G T O NW A S H I N G T O N
µ 0 4 8 Miles
Affordable
Mixed Income
Market Rate
Future Stage Red Line Station Service Areas
Green Line LRT and Station Service Areas
Green Line Extension LRT and Station Service Areas
Northstar CR and Station Service Areas
Red Line BRT and Station Service Areas
Blue Line LRT and Station Service Areas
12 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 13
0 1 8 Miles
NORTH
2010s DECADE
SUBURBAN DEVELOPMENT LOCATIONS
Affordable
Mixed Income
Market Rate
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Eureka Twp.
Eden Prairie
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Helena Twp.
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Linwood Twp.
Douglas Twp.
Cottage Grove
Empire Twp.
Hampton Twp.
Camden Twp.
Dahlgren Twp.
Marshan Twp.
Independence
Minnetonka
Vermillion Twp.
Hollywood Twp.
Chaska
Lake Elmo
Belle Plaine Twp.
Waconia Twp.
St. Francis
Cedar Lake Twp.
Savage
Denmark Twp.
New Market Twp.
Watertown Twp.
Greenfield
Castle Rock Twp.Blakeley Twp.
Sand Creek Twp.
Brooklyn Park
Prior Lake
Laketown Twp.
Greenvale Twp.
Chanhassen
Coon Rapids
Young America Twp.
Spring Lake Twp.
Maplewood
Fridley
Roseville
Apple Valley
Victoria
Hastings
Farmington
Sciota Twp.
Hancock Twp.San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Stillwater
Champlin
Richfield
Randolph Twp.
St. Louis Park
Golden Valley
North Oaks
Mound
Wayzata
Ravenna Twp.
Inver Grove Heights
Credit River Twp.
Oakdale
Waterford Twp.
Arden Hills
Crystal
St. Lawrence Twp.
Shorewood
Baytown Twp.
Carver
West Lakeland Twp.
MendotaHeights
White Bear Twp.
Waconia
New Brighton
BrooklynCenter
Mahtomedi
Belle Plaine
White Bear LakeVadnaisHeights
Hopkins
New Hope
Newport
Jordan
S St. PaulFort Snelling
W St. Paul
Little Canada
Deephaven Lakeland
Mounds View Dellwood
St. Paul Park
Jackson Twp.
Watertown
Hanover
Robbinsdale
Centerville
Mayer
Marine on St. Croix
Bayport
Cologne
N St. Paul
Columbia Heights
St. Anthony
Tonka Bay
Miesville
Oak Park Heights
Coates
Elko New MarketNew Prague
Circle Pines
Bethel
Falcon Heights
Northfield
Hampton
SunfishLake
SLP
Grey CloudIsland Twp.
Lilydale
Woodland
Osseo
GemLake
Randolph
Vermillion
NYA
Excelsior
Maple Plain
Long Lake
Greenwood
MB
St. Bonifacius
New Germany
Pine Springs
Lexington
SPLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
ML
St. Marys Point
Hamburg
New Trier
Hilltop
Landfall
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A N O K AA N O K A
H E N N E P I NH E N N E P I N
S C O T TS C O T T
C A R V E RC A R V E R
R A M S E YR A M S E Y
W A S H I N G T O NW A S H I N G T O N
µ 0 4 8 Miles
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Mixed Income
Market Rate
Future Stage Red Line Station Service Areas
Green Line LRT and Station Service Areas
Green Line Extension LRT and Station Service Areas
Northstar CR and Station Service Areas
Red Line BRT and Station Service Areas
Blue Line LRT and Station Service Areas
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µ 0 1 2 Miles
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Mixed Income
Market Rate
Blue Line LRT and Station Service Areas
Green Line LRT and Station Service Areas
Green Line Extension LRT and Station Service Areas
Northstar CR and Station Service Areas
I2
I2
I2
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17
18
20
19
1
2
3
45 6
7
89
10
11 12
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15
14 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
0 1 2 Miles
NORTH
District Projects Units
Minneapolis Districts 1 West Broadway & Penn District 4 2402 Near Northeast – Marshall Avenue 4 3873 Downtown – North Loop 22 2,5034 Downtown – Skyway Core 7 1,8195 Downtown – Loring Park 5 8066 Downtown – Elliot Park 3 4177 Downtown – Gateway and Mill Districts 8 1,2098 Downtown – St. Anthony / East Bank 8 1,3119 U of M – Marcy Holmes 7 33610 U of M – Dinkytown 16 1,44911 U of M – West Bank 3 557
District Projects Units
12 U of M – Stadium Village / Prospect Park 17 2,39413 Cedar / Isles / Dean 4 45114 Uptown 17 1,88715 South Minneapolis – Blue Line Corridor 12 528 St. Paul Districts 16 Green Line West – Midway 7 1,05917 Green Line East – Midway / Frogtown 8 38818 Downtown Core 10 1,51519 North Quadrant & Lowertown 8 69620 Koch Redev. Site / Otto & Shepard Rd. 2 405
Concentrations of Multifamily Development300+ New Units (Non-Senior)
Source: Dougherty Mortgage Multifamily Database
2010s DECADE
CENTRAL CITY DEVELOPMENT LOCATIONS
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 15
Blue Line LRT and Station Service Areas (½ mile)
Green Line LRT and Station Service Areas (½ mile)
Green Line Extension LRT and Station Service Areas (½ mile)
Northstar C.R. (½ mile)
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Minneapolis
Columbus
Grant
Lakeville
East Bethel
Andover
May Twp.
Nowthen
Orono
Corcoran
PlymouthMedina
Ramsey
Rogers
Woodbury
Ham Lake
Dayton Lino Lakes
Oak Grove
Bloomington
Rosemount
Forest Lake
Shakopee
Minnetrista
Benton Twp.
Eureka Twp.
Eden Prairie
Burnsville
Maple Grove
Helena Twp.
Edina
Linwood Twp.
Douglas Twp.
Cottage Grove
Empire Twp.
Hampton Twp.
Camden Twp.
Dahlgren Twp.
Marshan Twp.
Independence
Minnetonka
Vermillion Twp.
Hollywood Twp.
Chaska
Lake Elmo
Belle Plaine Twp.
Waconia Twp.
St. Francis
Cedar Lake Twp.
Savage
Denmark Twp.
New Market Twp.
Watertown Twp.
Greenfield
Castle Rock Twp.Blakeley Twp.
Sand Creek Twp.
Brooklyn Park
Prior Lake
Laketown Twp.
Greenvale Twp.
Chanhassen
Coon Rapids
Young America Twp.
Spring Lake Twp.
Maplewood
Fridley
Roseville
Apple Valley
Victoria
Hastings
Farmington
Sciota Twp.
Hancock Twp.San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Stillwater
Champlin
Richfield
Randolph Twp.
St. Louis Park
Golden Valley
North Oaks
Mound
Wayzata
Ravenna Twp.
Inver Grove Heights
Credit River Twp.
Oakdale
Waterford Twp.
Arden Hills
Crystal
St. Lawrence Twp.
Shorewood
Baytown Twp.
Carver
West Lakeland Twp.
MendotaHeights
White Bear Twp.
Waconia
New Brighton
BrooklynCenter
Mahtomedi
Belle Plaine
White Bear LakeVadnaisHeights
Hopkins
New Hope
Newport
Jordan
S St. PaulFort Snelling
W St. Paul
Little Canada
Deephaven Lakeland
Mounds View Dellwood
St. Paul Park
Jackson Twp.
Watertown
Hanover
Robbinsdale
Centerville
Mayer
Marine on St. Croix
Bayport
Cologne
N St. Paul
Columbia Heights
St. Anthony
Tonka Bay
Miesville
Oak Park Heights
Coates
Elko New MarketNew Prague
Circle Pines
Bethel
Falcon Heights
Northfield
Hampton
SunfishLake
SLP
Grey CloudIsland Twp.
Lilydale
Woodland
Osseo
GemLake
Randolph
Vermillion
NYA
Excelsior
Maple Plain
Long Lake
Greenwood
MB
St. Bonifacius
New Germany
Pine Springs
Lexington
SPLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
ML
St. Marys Point
Hamburg
New Trier
Hilltop
Landfall
D A K O T AD A K O T A
A N O K AA N O K A
H E N N E P I NH E N N E P I N
S C O T TS C O T T
C A R V E RC A R V E R
R A M S E YR A M S E Y
W A S H I N G T O NW A S H I N G T O N
µ 0 4 8 Miles
Affordable
Mixed Income
Market Rate
Future Stage Red Line Station Service Areas
Green Line LRT and Station Service Areas
Green Line Extension LRT and Station Service Areas
Northstar CR and Station Service Areas
Red Line BRT and Station Service Areas
Blue Line LRT and Station Service AreasHousing Type:Affordable
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Market Rate
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HugoBlaine
Eagan
Scandia
Afton
Minneapolis
Columbus
Grant
Lakeville
East Bethel
Andover
May Twp.
Nowthen
Orono
Corcoran
PlymouthMedina
Ramsey
Rogers
Woodbury
Ham Lake
Dayton Lino Lakes
Oak Grove
Bloomington
Rosemount
Forest Lake
Shakopee
Minnetrista
Benton Twp.
Eureka Twp.
Eden Prairie
Burnsville
Maple Grove
Helena Twp.
Edina
Linwood Twp.
Douglas Twp.
Cottage Grove
Empire Twp.
Hampton Twp.
Camden Twp.
Dahlgren Twp.
Marshan Twp.
Independence
Minnetonka
Vermillion Twp.
Hollywood Twp.
Chaska
Lake Elmo
Belle Plaine Twp.
Waconia Twp.
St. Francis
Cedar Lake Twp.
Savage
Denmark Twp.
New Market Twp.
Watertown Twp.
Greenfield
Castle Rock Twp.Blakeley Twp.
Sand Creek Twp.
Brooklyn Park
Prior Lake
Laketown Twp.
Greenvale Twp.
Chanhassen
Coon Rapids
Young America Twp.
Spring Lake Twp.
Maplewood
Fridley
Roseville
Apple Valley
Victoria
Hastings
Farmington
Sciota Twp.
Hancock Twp.San Francisco Twp.
Shoreview
Nininger Twp.
Stillwater Twp.
Anoka
Louisville Twp.
Stillwater
Champlin
Richfield
Randolph Twp.
St. Louis Park
Golden Valley
North Oaks
Mound
Wayzata
Ravenna Twp.
Inver Grove Heights
Credit River Twp.
Oakdale
Waterford Twp.
Arden Hills
Crystal
St. Lawrence Twp.
Shorewood
Baytown Twp.
Carver
West Lakeland Twp.
MendotaHeights
White Bear Twp.
Waconia
New Brighton
BrooklynCenter
Mahtomedi
Belle Plaine
White Bear LakeVadnaisHeights
Hopkins
New Hope
Newport
Jordan
S St. PaulFort Snelling
W St. Paul
Little Canada
Deephaven Lakeland
Mounds View Dellwood
St. Paul Park
Jackson Twp.
Watertown
Hanover
Robbinsdale
Centerville
Mayer
Marine on St. Croix
Bayport
Cologne
N St. Paul
Columbia Heights
St. Anthony
Tonka Bay
Miesville
Oak Park Heights
Coates
Elko New MarketNew Prague
Circle Pines
Bethel
Falcon Heights
Northfield
Hampton
SunfishLake
SLP
Grey CloudIsland Twp.
Lilydale
Woodland
Osseo
GemLake
Randolph
Vermillion
NYA
Excelsior
Maple Plain
Long Lake
Greenwood
MB
St. Bonifacius
New Germany
Pine Springs
Lexington
SPLake St. Croix Beach
Lakeland Shores
Lauderdale
Loretto
Mendota
Rockford
ML
St. Marys Point
Hamburg
New Trier
Hilltop
Landfall
D A K O T AD A K O T A
A N O K AA N O K A
H E N N E P I NH E N N E P I N
S C O T TS C O T T
C A R V E RC A R V E R
R A M S E YR A M S E Y
W A S H I N G T O NW A S H I N G T O N
µ 0 4 8 Miles
Affordable
Mixed Income
Market Rate
Future Stage Red Line Station Service Areas
Green Line LRT and Station Service Areas
Green Line Extension LRT and Station Service Areas
Northstar CR and Station Service Areas
Red Line BRT and Station Service Areas
Blue Line LRT and Station Service Areas
2010 2013 2016 2019
NUMBER OF PROJECTS OPENED
65
10
70
60
50
40
30
20
10
0
Throughout the last decade, several metrics show that the market for newly-constructed rental units continually expanded from year to year across the Twin Cities. Three annual measures in particular – the number of projects opening, the number of cities with new projects, and the share of units built in the suburbs – clearly reveal the trends of increasing volume and geographic expansion.
2010s TREND: CONTINUED MARKET EXPANSION
Steady Increase in Volume• Just ten new projects opened in 2010 across the
Twin Cities, while 65 opened in 2019, a 6-fold increase.
• With the exception of 2014, the number of new projects increased each year compared to the previous year.
• There are 122 projects currently under construction across the Twin Cities, and well more than half are expected to open in 2020.
More Cities in the Mix• In a nearly linear pattern, the number of cities
seeing a new rental project steadily increased last decade, from only five cities in 2010 to 28 cities by 2019.
• Currently, 37 cities have projects under construction for opening within the next two years.
A Move to the Suburbs• Development increasingly migrated outward from
the central cities to the suburbs in the 2010s. In the first five years of the decade, 30% of the new units were built in the suburbs each year, on average. By the second five years, 51% of the units opened in the suburbs annually, on average.
• Fifty-one percent of units under construction are located in the suburbs.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
2010 2013 2016 2019
60%
50%
40%
30%
20%
10%
0%
SUBURBAN SHARE (%) OF NEW UNITS
48%
27%
2010 2013 2016 2019
30
25
20
15
10
5
0
NUMBER OF CITIES WITH NEW PROJECTS
28
5
16 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
Source: Dougherty Mortgage LLC; excludes age-restricted (senior) units.
As the decade closed, the rental market in the Twin Cities showed many signs of maturing, with much of the growth potential in the central cities realized. As markets mature, products become more specialized with the aim of capturing every last consumer before demand flattens or starts to decline. A variety of diverse rental products emerged in the last half of the 2010s in the Twin Cities. Some examples are shown below.
Micro UnitsOnly one micro unit building – 48-unit Cozy Flats in Minneapolis – was built in the Twin Cities prior to 2015. Conversely, 15 micro unit buildings opened in 2015 or after, with nearly 900 units. Another six micro buildings with 420 units were under construction at decade’s end. Micro units bring cost-conscious renters to new buildings by offering lower gross rents in exchange for smaller unit sizes. Micro unit buildings are still a phenomenon exclusive to Minneapolis and St. Paul.
Example: Nolo Flats, a 71-unit building offering micro units in the North Loop of Minneapolis.
High-rise TowersTwenty-one high-rise buildings (8+ stories) opened last decade, offering nearly 4,900 units. Three-quarters of this total was produced after 2015. About 60% of the new high-rise supply opened in Downtown Minneapolis (11 projects), followed by the U of M neighborhoods in Minneapolis (24% in four projects) and the suburbs (12% in four projects). Currently, six towers of 8-28 stories are under construction for 2020 or 2021 delivery; all but one are in Downtown Minneapolis neighborhoods.
Example: 26-story Nic on 5th in Downtown Minneapolis.
Gated Communities with Vast AmenitiesDoran Companies opened one of the first gated rental communities in Maple Grove late last decade and is now leasing a second development in Shakopee. Renters seeking amenity-rich projects in highly-secured communities represent a new niche market in the Twin Cities.
Example: 380-unit Reserve at Arbor Lakes in Maple Grove.
Narrowly-targeted Supportive HousingIn the past few years, highly-specialized housing with services has opened for such populations as young adults aging out of foster care, homeless teens, veterans, Native American youth, and formerly incarcerated adults. Sixty percent of new units for targeted populations have opened since 2016. In total, about 1,300 units of housing for targeted populations opened in 23 developments last decade in the Twin Cities.
Example: Prior Crossing, 42 units of housing for homeless youth on the Green LRT line in Midway St. Paul.
Affordable Senior Housing While not covered in this report, the affordable senior housing supply has taken-off since 2016, with 2,360 new units opening between 2016 and 2019, more than twice the production of the prior six years. For the first time, developers have tried their hand at new affordable assisted living projects involving low-income tax credits in combination with elderly waiver and group residential housing funding.
Example: The Grainwood, a 170-unit affordable senior housing development in Prior Lake.
2010s TREND: PRODUCT DIVERSIFICATION
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 17
18 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
2010s TREND: TRANSIT-ORIENTED DEVELOPMENT BOOM
New Rail Transit Attracts DevelopmentOver the last decade, the existing Green and Blue LRT lines were the site for 13,860+ new non-senior units in the Twin Cities; this total rises to more than 16,000 when one adds the units built in the Green line extension under construction in the west and southwest suburbs.
The Northstar commuter rail line, which brings riders from Big Lake in Sherburne County and five additional stops to Downtown Minneapolis, had 11 projects (943 units) built within 1/2 mile of a station platform last decade. This trend continues in this decade, with units planned at the Riverdale stop in Coon Rapids and other locations.
As the decade progressed, more development became focused in the Blue and Green line LRT corridors (existing and future spurs), along the Northstar commuter rail line, and in the emerging Red and Gold bus rapid transit (BRT) lines. Including development within 1/2 mile of a stop in any rail or bus rapid transit corridor, transit-oriented development accounted for more than 17,200 units in 136 projects in the Twin Cities last decade.
Rail Nodes in Dense Urban Areas: Convenient for Thousands of RentersEleven rail transit station platforms each saw at least 1,000 new multifamily units built last decade within a 1/2 mile radius, the distance considered transit-oriented. The transit stop with the largest number of nearby transit-oriented units – 3,610 – was the Government Plaza station in Downtown Minneapolis on the Blue/Green LRT lines. Four other Downtown Minneapolis stops, plus three U of M/East Bank Green line stops and three Downtown St. Paul Green line stops, topped the list of the most well-located stations in the Twin Cities.
New Multifamily Development Within 1/2 Mile of Rail Transit Station Platforms
Twin Cities 2010-2019
Transit Line Projects Units
Blue Line LRT* 53 7,536Green Line LRT 52 6,327Green Line LRT Extension 17 2,140Northstar Commuter Rail 11 943
Metro Area Total 133 16,946% of All New Multifamily** 34% 40%
* Includes five stations in Downtown Minneapolis that also serve the Green Line.** Non-senior units only.
Source: Dougherty Mortgage Multifamily Database
Source: Dougherty Mortgage Multifamily Database
Rail Transit Station Platforms With the Highest TOD Density1,000+ New Multifamily Units (Non Senior)
Twin Cities 2010-2019
– Within 1/2 Mile –Transit Station Submarket Transit Corridor Projects* Units*
Government Plaza DT Minneapolis Blue & Green LRT 16 3,610Target Field DT Minneapolis Blue & Green LRT 25 3,396Warehouse District/Hennepin Ave. DT Minneapolis Blue & Green LRT 15 2,940Nicollet Mall DT Minneapolis Blue & Green LRT 14 2,926Stadium Village U of M (East Bank) Green LRT 15 2,307US Bank Stadium DT Minneapolis Blue & Green LRT 11 2,088Central DT St. Paul Green LRT 17 2,023Prospect Park U of M (East Bank) Green LRT 14 1,956Union Depot DT St. Paul Green LRT 15 1,668East Bank U of M (East Bank) Green LRT 9 1,41910th Street DT St. Paul Green LRT 10 1,353
* Note: Many projects in areas noted above are located within 1/2 mile of two or more station platforms.
2010s TREND: CHANGING DEFINITION OF SUITABLE SITES
As easily-developable sites became scarcer during the latter part of the decade, developers turned to site locations not typically considered in past eras. These included industrial brownfield parcels and grayfield sites, those that held obsolete commercial uses such as strip shopping malls, old office buildings, and outright parking lots.
Industrial Parcels with Prime Housing PotentialNumerous former industrial sites have been recently turned into large-scale housing developments, most successfully by Dominium with affordable projects in Minneapolis, St. Paul, and Minnetonka. Often, older industrial buildings are large in size and well-located within the urban grid. Parcels in the central cities or along rail transit corridors offer unique opportunities, such as along the new Green Line LRT extension through the southwest suburbs.
Map at right: Dominium’s Union Flats at the edge of vast industrial uses to the north and east in the St. Anthony Park neighborhood of St. Paul. (Base map: Google)
Regional Shopping Malls Draw RedevelopmentWith Southdale being the best example, developers began to focus in the latter half of the 2010s on redevelopment opportunities around regional shopping malls. Parcels with obsolete big box retailers and little-used parking lots have proven to be very viable sites for new multifamily development, adding housing into the mix of retail, service, office, and entertainment uses already in-place.
Map below: 2010s projects built or under construction near Southdale Mall.
Grayfield Sites in Dense Commercial AreasMany first- and second-tier suburbs of the Twin Cities hold sizeable commercial districts that never included housing uses. They are becoming desirable multifamily locations, helping to convert large zones of parking lots and obsolete commercial buildings into horizontal mixed-use residential areas with a wide array of destinations for renters. A good example is the west portion of the I-494 strip in Bloomington, where nearly 1,000 units have been built.
Southdale Center
Fran
ce A
venu
e
W. 66th Street
York
Ave
nue
66 West / 39 Units
1
One Southdale Place / 231 Units
5
Onyx Edina / 242 Units
Millennium on 66th (U/C) / 393 Units
2
Aria Edina / 185 Units
3
4
SOUTHDALE – EDINA
1 2
3
4
5
6
71 France / 241 Units
6
Raymond Avenue
University Avenue
Union Flats
ST. ANTHONY PARK INDUSTRIAL AREA
Vandalia Street
Green Line LRT Raymond Ave. Station
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 19
In 2014, Dougherty Mortgage started measuring the overall average price per square foot for newer projects (three years old or less) in the 4th quarter in each Twin Cities submarket. We continued this measurement through 2019, gathering six years’ worth of data, as shown below.
To the surprise of no one, asking prices for new rental units in the Twin Cities increased at a strong clip during the last decade, with annual increases in virtually all metro area submarkets each year.* Over the decade, the Twin Cities overall average asking price for newer units increased from $2.05 per square foot in 2014 to $2.24 at the end of 2019. During this period, new rental product openings steadily shifted toward the suburban submarkets, which accounted for roughly half of all openings in the second half of the decade, up from only 30% in the first half. More product openings in the relatively lower-price suburbs had a moderating effect on the overall Twin Cities average asking price. However, pricing gains in the core city submarkets – particularly Downtown Minneapolis, the U of M neighborhoods, and Uptown – bolstered a solid overall price gain in the Twin Cities between 2014 and 2019.
*It is important to remember that asking prices are mostly a benchmark for the direction of the trends in pricing, and not necessarily definitive indicators of ultimate market prices. Rents that households ultimately pay (“effective rents”) are often lower than asking rents due to concessions or move-in discounts offered by the owner, and prices may be negotiated downward directly by renter prospects as well.
Source: Dougherty Mortgage Multifamily Database
Asking Prices for Newer Rental Units in the Twin Cities: 2014-2019 (4th Qtr.)Overall Submarket Average Price per Square Foot
Units Opened for Three Years or Less
$2.80
$2.60
$2.40
$2.20
$2.00
$1.80
$1.60
$1.40 Downtown U of M Minneapolis/ Minneapolis/ Downtown St. Paul/ First-ring Southwest Northwest Southeast Northeast Minneapolis Neighborhoods Uptown Neighborhoods St. Paul Neighborhoods Suburbs Suburbs Suburbs Suburbs Suburbs
2014
2015
2016
2017
2018
20192019 Twin Cities Average: $2.24
$2.71 $2.70 $2.69
$2.43 $2.41 $2.39
$2.14
$1.93
$1.82 $1.80 $1.75
2010s TREND: ESCALATING PRICES FOR NEW PRODUCT
20 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
Despite solid gains in affordable rental housing production last decade, the overall shortfall of units only worsened. By not producing enough units to satisfy demand in the 2010s, the problem spills over into the 2020s, making this decade’s challenge that much greater.
The Urban Core Far Outproduces the SuburbsThe pattern of affordable rental development in the Twin Cities last decade was clear: the urban core communities provided the bulk of all units. Minneapolis and St. Paul together accounted for approximately 48% of all new production in the decade (5,292 units), while the close-in first-ring suburbs added an additional 15% (1,680 units; chart at right). In producing 63% of all new units in the Twin Cities, the central cities and first-ring suburbs greatly overproduced relative to their proportion of population (37%), households (38%) and jobs (46%) in the Twin Cities.
Pushing the Problem to the Next DecadeBased on the Met Council’s estimates of affordable housing demand, the Twin Cities housing production system should have delivered about 42,000 units last decade to serve renters at or below 60% of area median income (AMI) (See chart below). In reality, a little more than 11,000 affordable rental units (of all types, including for seniors) were built. Thus, three quarters of new demand went unsatisfied. The lack of affordable rental production last decade is an all-out crisis as the production shortfall carries forward in the form of higher numbers of low-income renters who are cost-burdened or who are forced to live in overcrowded or substandard units. And the solution lies mainly with the outer suburbs, which collectively need production increases on the order of seven to eight times last decade’s output (only 4,100 units) just to keep pace with growing need, to say nothing of catching up for prior shortfalls.
2010s TREND: WORSENING SHORTAGE OF AFFORDABLE HOUSING
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 21
1) Dougherty Mortgage Multifamily Database.
2) Metropolitan Council: 2011-2020 Allocation of Affordable Housing Need (10/4/17). Affordable rental (<60% AMI) need is calculated at 80% of the total affordable demand estimate for the Twin Cities, equating to 42,056 new affordable rental units needed in the 2010s, excluding any vacancy factor.
Affordable Rental Housing Production vs. Demand Growth: 2010-2019General-Occupancy, Targeted Groups, Seniors
Twin Cities (7 Counties)
New Affordable New Demand Percent of New Demand Rental Units for Affordable Demand Satisfied Not Served by Development Ring Opened1 Rental Units2 by Production New Production
Urban Core:Central Cities & First Ring Suburbs 6,972 8,557 81% 1,585Suburban & Exurban Ring:Southeast Suburbs 1,415 9,138 15% 7,723Northwest Suburbs 1,124 7,086 16% 5,962Southwest Suburbs 807 11,987 7% 11,180Northeast Suburbs 752 5,288 14% 4,536
Subtotal 4,098 33,499 12% 29,401Twin Cities Total 11,070 42,056 26% 30,986
New Affordable Rental Units Produced by Twin Cities Submarket
2010-2019
Central Cities 5,292
First-Ring Suburbs 1,680
Southeast Suburbs 1,415
Northwest Suburbs 1,124Southwest Suburbs 807Northeast Suburbs 752
Source: Dougherty Mortgage Multifamily Database
22 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
MARKET OUTLOOK 2020
As we begin 2020, more rental housing is in the construction pipeline than at any time in decades – perhaps ever – in the Twin Cities. Nearly 16,700 non-senior rental units were under construction at the end of 2019 according to our research, with virtually all of it expected to open within the next two years, and far more than half in 2020 alone. Annualized over the next two years, this construction total is one-third higher than the 6,300 units that have opened per year on average in the past three years. Clearly, the full Twin Cities rental market is poised for a big test for product absorption, achievable rents, and vacancy rates over the next several years.
In terms of submarkets, Downtown Minneapolis continues to attract the most development, and 3,400 units are being built there now. Nearly 2,400 units are expected to open in 2020, making Downtown Minneapolis easily the most competitive submarket this coming year. Next, the southwest continues to lead all outer suburban submarkets with roughly 2,200 units under construction, with as many as 1,800 opening this year. Shakopee and Minnetonka will lead in unit deliveries in this submarket.
Additional submarkets with high amounts of construction in the pipeline include the first-ring suburbs (2,043 units), the Minneapolis neighborhoods (2,021 units), and the southeast suburbs (1,888 units). Within these submarkets, competitive areas over the next two years will include the West End in St. Louis Park/Golden Valley (536 units), Robbinsdale (350 units), Longfellow in Minneapolis (531 units), and Burnsville (529 units), Woodbury (471 units), and Apple Valley (373 units) in the southeast suburbs.
Overall, the coming decade should see much more construction in the suburbs as developers look to markets with untapped demand. Currently, 51% of units under construction are in the suburbs (pie chart at left), a proportion that has been consistent for the last five years. Regardless of the annual total of new units, however, far more than half of multifamily construction going forward should be in suburban communities. Only 13,000 new rental units were built in the outer suburbs last decade but growth there approached 100,000 households. Only a few suburbs can say that they have had significant amounts of new rental construction, leaving most areas with good opportunities for new development.
Rental Housing Under Construction by Submarket – YE 2019Non-Senior Units
Twin Cities (7 Counties)
Submarket Market Rate Affordable Total % of Total
Downtown Minneapolis 3,057 339 3,396 20.4%Southwest Suburbs 1,544 622 2,166 13.0%First Ring Suburbs 2,006 37 2,043 12.2%Minneapolis Neighborhoods 1,552 469 2,021 12.1%Southeast Suburbs 1,759 129 1,888 11.3%Northeast Suburbs 934 415 1,349 8.1%Northwest Suburbs 900 168 1,068 6.4%St. Paul Neighborhoods 902 3 905 5.4%Uptown Minneapolis 813 0 813 4.9%U of M Neighborhoods 701 0 701 4.2%Downtown St. Paul 334 0 334 2.0%
Total 14,502 2,182 16,684 100.0%
Source: Dougherty Mortgage Multifamily Database
Minneapolis 41.5%St. Paul 7.4%
Southwest Suburbs 13.0%
First-Ring Suburbs 12.2%
Southeast Suburbs 11.3%Northeast Suburbs 8.1%Northwest Suburbs 6.4%
Rental Units (Non Senior) Under Constructionby Development Ring – YE 2019
Twin Cities
Source: Dougherty Mortgage Multifamily Database
TWIN CITIES MULTIFAMILY MARKET 2019-20 | 23
ABOUT DOUGHERTY MORTGAGE
A Leading Lender with a Nationwide PresenceDougherty Mortgage LLC is a top provider of conventional and affordable multifamily financing, with offices throughout the country. Dougherty Mortgage specializes in providing access to federal agency loan programs to customers interested in Fannie Mae DUS®, Freddie Mac Program Plus®, and FHA financing solutions. Dougherty Mortgage has also been awarded designation as a lender/partner with USDA under the Community Facilities guaranteed loan program. In addition to conventional multifamily financing, Dougherty Mortgage also provides financing solutions for affordable housing, senior independent and assisted living residences, hospitals, health care facilities and student housing. Over the past decade, Dougherty Mortgage has consistently been a top-10 HUD/FHA lender in terms of the number of loans, dollar amount, or both. Dougherty Mortgage is also one of the country’s fastest-growing Fannie Mae DUS® lenders.
Affordable Housing Finance – A Variety of SolutionsIn addition to extensive conventional financing experience, Dougherty Mortgage offers comprehensive debt solutions for affordable rental housing projects in all types of settings. As a leading Fannie Mae and HUD/FHA lender, we recognize the challenges associated with affordable housing finance and guide our clients through the process at all stages. Some of the many solutions we help our clients with include Fannie Mae DUS® and FHA-insured mortgages, tax-exempt credit enhancement, low-income housing tax credits, historic and new markets tax credits, and various government programs that offer subordinated loans or grants.
Our affordable housing clients include both non-profit and for-profit multifamily housing owners, developers and operators. Whether our clients are looking to refinance, acquire, build, or rehabilitate, we offer compelling financial options and work diligently to develop a creative, tailored solution for each transaction.
Integrated Financing Solutions – Dougherty Mortgage and Dougherty & CompanyDougherty Mortgage LLC partners with an affiliated entity, Dougherty & Company LLC, on many affordable transactions that involve 4% low-income housing tax credits coupled with tax-exempt bonds. On all types of housing transactions, Dougherty & Company may also serve as the underwriter for tax increment revenue bonds, subordinate bonds, housing and healthcare bonds, and other types of issuances.
Dougherty Mortgage LLC90 South Seventh Street, Suite 4300Minneapolis, MN 55402612-317-2100866-922-0786 Toll-freewww.doughertymarkets.com
For more information about this report, please contact Thomas G. O’Neil at Dougherty Mortgage LLC 612-317-2122, [email protected]
24 | MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20
Avenida Crossing$33.8 millionFannie Mae
Dallas, TX l January 2020
Bowman Pointe Phase III$13 millionFannie Mae
Little Rock, AR l January 2020
Ridgeside Apartments$9.1 millionFannie Mae
Hixson, TN l December 2019
Soll Apartments$26.7 millionFannie Mae
Des Moines, IA l September 2019
REPRESENTATIVE TRANSACTIONS – CONVENTIONAL/MARKET RATE
Loden SV$42 millionFannie Mae
Shoreview, MN l May 2019
Hawks Landing$6.0 millionFannie Mae
Kingsville, TX l June 2019
The Plantation Apartment Homes$20.7 millionFannie Mae
Olive Branch, MS l February 2019
Bear Canyon$23.1 millionFannie Mae
Tucson, AZ l February 2019
Crossroads at Terrell$35 million
HUD 221(d)(4) N-CTerrell, TX l December 2019
Sundance at Settler’s Ridge$53.5 million
HUD 221(d)(4) N-CWoodbury, MN l December 2019
The Reserve at Venice$46.7 million
HUD 221(d)(4) N-CVenice, FL l November 2019
Parker Station Flats$42.3 million
HUD 221(d)(4) N-CRobbinsdale, MN l November 2019
Community Health Centers of the Central Coast
$16.2 millionUSDA Financing
Templeton, CA l November 2019
Waverly Apartment Homes$29.7 million
HUD 221(d)(4) N-CBurleson, TX l September 2019
Audubon Park Apartment Homes$20.8 million
HUD 223(a)(7) RefiZachary, LA l September 2019
Viridium$34.2 million
HUD 221(d)(4) N-CMinneapolis, MN l August 2019
Fannie Mae
HUD/FHA and USDA Rural Development Community Facilities
MARKET VIEWPOINT: TWIN CITIES MULTIFAMILY MARKET 2019-20 | 25
Gateway Northeast$21 million
Fannie Mae Forward M. TEBMinneapolis, MN l January 2020
Westcreek Townhomes$14.9 millionFannie Mae
San Antonio, TX l October 2019
Glynn Pines$7.3 millionFannie Mae
Brunswick, GA l July 2019
The Trails of Oak Creek$8.3 millionFannie Mae
Kettering, OH l July 2019
REPRESENTATIVE TRANSACTIONS – AFFORDABLE
Westgate Apartments$3.6 millionFannie Mae
Hibbing, MN l June 2019
CHAF Portfolio$13.9 millionFannie Mae
St. Petersburg, FL l April 2019
Aspen Bluff Apartments$538,000
Fannie Mae SupplementalPeoria, IL l January 2019
Stonebridge Apartments$3.2 millionFannie Mae
Columbia, TN l November 2018
Holmes Greenway Apartments$10.5 million
HUD 221(d)(4) Sub RehabMinneapolis, MN l November 2019
Brooks Landing & Brook Gardens $14.8 million
HUD 221(d)(4) LIHTC PilotFirst transaction in country done under this program
Brooklyn Park, MN l August 2019
Lakeland Shores Apartments$1.8 million
HUD 202/223(f) Mod RehabDuluth, MN l April 2019
Unity Place$12.8 million
HUD 221(d)(4) Sub RehabBrooklyn Center, MN l March 2019
The Winslow$20.9 million
HUD 221(d)(4) N-CWest St. Paul, MN l December 2018
Riverside Homes$10.9 million
HUD 221(d)(4) Sub RehabMinneapolis, MN l November 2018
The Chamberlain$47.8 million
HUD 221(d)(4) N-CRichfield, MN l July 2018
Eastgate Apartments$16.1 million
HUD 221(d)(4) N-CRochester, MN l May 2018
Fannie Mae
HUD/FHA
Mortgage banking for multifamily housing, senior housing, student housing, and healthcare facilities
90 South Seventh Street, Suite 4300Minneapolis, MN 55402
612-317-21001-800-922-0786 Toll Freewww.doughertymarkets.com
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