2015 3rd quarter twin cities multifamily market re...

Twin CitiesMultifamily Market Report

20153rd Quarter

The Twin Cities Metro Area (TCMA) continues to experience a flourishing economy and robust multifamily fundamentals such as low vacancy, rapid absorption and steady rent growth. These are a few of the reasons there are a growing number of investors and developers from around the country drawn to the TCMA. While there have been over 13,000 multifamily units added since 2013, there is still a tremendous demand for more multifamily product throughout this Metropolitan Statistical Area (MSA).

The dramatic growth in the renter pool from both the Boomers and Millennials has driven the demand and absorption for multifamily product. According to the Urban Institute, the growth in rental households will exceed that of homeowners by four million from 2010 to 2030, with an increase of thirteen million rental households and nine million homeowner households. Historically, people in the 18-34 year old demographic comprise the largest pool of renters and in 2009, more people turned 18 than at the peak of the Baby Boom. Additionally, the National Multifamily Housing Council (NMHC) predicts Baby Boomers will make up more than 65% of the renter pool in the next three to five years. Thus, we anticipate the renter pool to be the largest of record for the next five to seven years, which will drive development demand.

This trend is being driven by a number of factors, the greatest being the number of Baby Boomers entering the rental market due to a desire for live-work-play lifestyle. Many are seeking the type of urban living that typically has been associated with young college graduates — so much so that boomers are renting apartments and buying condos at more than twice the rate of their millennial children. Harvard University’s Joint Center for Housing Studies found that Baby Boomers accounted for 42% of the growth in renters over the past decade. Baby Boomers, those ages 50-69, account for 24.2% of the population in the Twin Cities, or 847,161 people.

Additionally, Millennials are beginning to build their first independent households, which typically means more renting. Pew Research notes that the Millennial population in the United States will increase to 75.3 million in 2015, and is projected to peak in 2036 at 81.1 million due to immigration adding to the Millennial pool.

More jobs will be created for Millennials over the next few years due to more Baby Boomers retiring. It is estimated that by 2020, Millennials will make up more than 50% of the work force. As more jobs become available, many Millennials are moving out of their parent’s homes; most choose to rent due in part to student loan debt and the flexibility to move if their job provides opportunities for upward mobility. Local apartment owners report that one in four of their apartments are rented to Millennials moving to the TCMA for a job. As of 2014, the Twin Cities Millennial population, those between ages 18-34, was 823,780.

2

MultifamilyOverview

The increased number of people choosing to move to multifamily housing continues to fuel demand for new product to fit the desires of both generations. Baby Boomers and Millennials alike are looking for housing in walkable areas that are rich in retail, restaurant and entertainment options. Additionally, they are looking to belong to a community. Large common area spaces, more amenities and planned activities help bridge the gap between Millennials and Baby Boomers and build a stronger sense of community.

Developers are just beginning to build for the mix of Baby Boomers and Millennials. While Millennials prefer smaller unit sizes, Baby Boomers are typically looking for two-bedroom and three-bedroom units with larger kitchens and more closet space. Ideally urban area developments should incorporate a mix of these unit types to attract and retain both generations, as well as to keep Millennials living in the property throughout their life stages. For single Millennials, small one-bedroom units work great. However, once they get married and start families, there is a need and demand for units that allow them to grow in place. Many cities in the Minneapolis-Saint Paul metro area are working to provide areas to incentivize people to stay in their cities throughout their life stages. Some are adding schools, public parks and entertainment options for all ages to attract and keep people in the cities.

While some developers/owners are concerned about oversaturation, we predict the need for more multifamily units will continue to thrive for the next several years based on the large number of Millennials and Baby Boomers entering the rental market. As developers begin designing and delivering product with blending the Millennial and Baby Boomer generations in mind, we predict rental rates will increase, occupancy will continue to thrive and land prices will continue to increase for well-located urban and first ring suburban sites as well as for well-located/walkable suburban sites.

Vacancy rates in the TCMA averaged 2.3% in Q3 2015, with the lowest vacancy rates being 1.4% in the NonDowntown Saint Paul submarket. Downtown Minneapolis vacancy rates averaged 6.4% and Downtown Saint Paul rates averaged 2.8%. The higher than average vacancy rates in the downtown areas is primarily due to the large volume of new units delivered that are still in lease- up. Rental rates increased an average of 5.7% year-over-year, with the largest increases in NonDowntown Minneapolis (8.1%) and Downtown Saint Paul (6.8%). Absorption totaled 1,173 units, while 1,276 units were delivered in Q3 2015. Investors have “discovered” the TCMA, increasing demand for product. Currently, the Twin Cities are on pace to exceed $1 billion in sales volume for 2015, which will break the record volume in 2014 of $937.2 million. Historically low interest rates, a surplus of capital, investors chasing yield and outstanding fundamentals have fueled an aggressive sales market in the TCMA. The average price per unit in the TCMA in Q3 2015 was $132,405, a 29% increase from the previous year. Capital demand for multifamily assets is at an all-time high, especially for well-located Class A urban and first-ring suburban assets as well as for value-add assets across the metro area.

3

MultifamilyOverview

• 35,154 jobs were added in past 12 months

• 5 years of multifamily vacancy rates below 3.0%

• 2,545 market rate units and 827 affordable units were delivered through September 2015

• Absorption for the first three quarters of 2015 was 2,702 units

• NonDowntown Saint Paul submarket had lowest vacancy rate at 1.4%

• Highest average market rate rents were reported in Downtown Minneapolis at $1,330

• Unemployment rate in TCMA as of September 2015 was 3.1%, nearly 2% below the US unemployment rate of 4.9%

4

MultifamilyOverview

1,700,000

1,750,000

1,800,000

1,850,000

1,900,000

1,950,000

2,000,000

Employment

Twin Cities Employment

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

TCMA US

Twin Cities & United State Unemployment Rates

5

Twin CitiesOverview

Twin Cities• #2 Lowest Unemployment Rate for Large Metropolitan Areas (Bureau of Labor Statistics)

• #2 Best Cities for Recent Grads (Realtor Mag)

• #2 Greenest Cities in America (Travel + Leisure)

• #2 Most Playful Cities for Families (Travel Pulse)

• #3 Friendliest Cities in America (Time Magazine)

• #3 Top Midwest Cities for Jobs (ZipRecruiter.com)

• #9 Most Educated Cities (wallethub.com)

• #25 World’s Friendliest Cities (Travel + Leisure)

Minneapolis• #1 Top 10 Healthiest Cities (Livability.com)

• #1 Most Bikeable Cities (grindtv.com)

• #3 Best Cities for 20-Somethings (greatist.com)

• #5 Best Destination for Culturephiles (USA Today)

• #7 Most Recession-Recovered Cities (wallethub.com)

• #28 Top 50 Meeting Destinations in the United States (cvent.com)

Saint Paul• #9 Top 10 Best Places to Live (Mens Journal)

• #19 Best Cities for 20-Somethings (greatist.com)

• #24 Most Recession-Recovered Cities (wallethub.com)

2015Rankings

The demand for new developments, both urban and suburban, is evident as new projects are leasing up well ahead of pro forma projections. There were two market rate projects in Minneapolis that delivered in 3Q 2015. Latitude 45, a 318 unit mid-rise development in Downtown Minneapolis, opened in September and was 66% leased by the end of October. Elements of Linden Hills is a 31 unit in the Uptown neighborhood of Minneapolis which was 55% leased within one month of opening. New suburban developments continue to lease up quickly as well. Siena Apartments, a 138 unit project in Saint Louis Park, opened in July and is 85% leased by the end of October. The first phase of 71 France, a 246 unit project in Edina, opened in September and was 42% leased within one month. There are a total of 591 urban market rate, 911 suburban market rate and 149 urban affordable units expected to deliver before year end.

Twin Cities Metro Area (TCMA) vacancy rates averaged 2.3% in Q3 2015 (This reflects market rate, affordable, and mixed income units). Average vacancy rates have remained at or below 3.0% in the TCMA for the past five years. Rental rates across the TCMA in Q3 2015 averaged $1,063/month, which is an increase of 5.7% year-over-year. Both Downtown Minneapolis and Downtown St. Paul exceeded the TCMA average, experiencing rental rate increases of 6.7% at $1,330/month and 6.80% at $1,287/month, respectively.

6

MarketConditions

$800

$900

$1,000

$1,100

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

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Q2

2007

Q3

2007

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Q3

2013

Q4

2014

Q1

2014

Q2

2014

Q3

2014

Q4

2015

Q1

2015

Q2

2015

Q3

Overall

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2006

Q1

2006

Q2

2006

Q3

2006

Q4

2007

Q1

2007

Q2

2007

Q3

2007

Q4

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2015

Q1

2015

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2015

Q3

Overall

Twin Cities Average Rental Rates

Twin Cities Average Vacancy Rates

7

Downtown Minneapolis

NonDowntown Minneapolis

North Suburbs

East Suburbs

Downtown Saint Paul

NonDowntown Saint Paul

Downtown Minneapolis NonDowntown Saint Paul East Suburbs

Avg Rent: $1,330 Avg Rent: $ 971 Avg Rent: $ 986

Vacancy: 6.4% Vacancy: 1.4% Vacancy: 1.6%

NonDowntown Minneapolis West Suburbs Southeast Suburbs

Avg Rent: $1,083 Avg Rent: $1,108 Avg Rent: $1,011


Downtown Saint Paul North Suburbs Southwest Suburbs

Avg Rent: $1,287 Avg Rent: $ 923 Avg Rent: $1,184


Twin Cities Metro Area

Avg Rent: $1,063

Vacancy: 2.3%

West Suburbs

Southwest Suburbs

Southeast Suburbs

SubmarketConditions

Twin CitiesMetro Area

*Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 unitsFor information on a specific city or neighborhood, please contact Erin Hartwig at [email protected]

8

Vacancy Rents

Q3 ’15 vs. Q3 ’14

5.7%

Vacancy Rents

Q3 ’15 vs. Q2 ’15

0.1% 0.9%

SubmarketConditions

$600

$700

$800

$900

$1,000

$1,100

$1,200

Market Rate Affordable Mixed Income

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%


Average Rental Rates Average Vacancy Rates

Rental Type

Total Number of Units

Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered

Number of Units Absorbed

Market Rate 147,141 2.40% $1,082 883 $1.23 889 949Affordable 25,755 1.40% $ 850 798 $1.07 387 190

Mixed Income 13,886 1.80% $1,155 942 $1.24 0 34

Overall 186,782 2.30% $1,063 878 $1.21 1,276 1,173

0.0%

DowntownMinneapolis

Cities Included:

Minneapolis

9

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.6% 6.7%

SubmarketConditions


$500

$700

$900

$1,100

$1,300

$1,500

$1,700

$1,900


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered



Mixed Income 1,447 2.30% $1,695 951 $1.78 0 (15)

Overall 13,869 6.40% $1,330 746 $1.79 570 328

NonDowntownMinneapolis

Cities Included:

Minneapolis

10

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.6% 8.1%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100

$1,200


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered


Market Rate 15,267 2.40% $1,165 749 $1.56 31 95Affordable 7,066 1.50% $ 884 725 $1.23 0 (1)

Mixed Income 3,206 2.00% $ 992 799 $1.27 0 46

Overall 25,539 2.20% $1,083 751 $1.45 31 140

DowntownSaint Paul

Cities Included:

Saint Paul

11

$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500


0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%18.0%20.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered


Market Rate 2,257 2.90% $1,417 821 $1.73 0 8Affordable 808 1.30% $ 973 730 $1.33 0 3

Mixed Income 285 5.60% $ 994 807 $1.20 0 0

Overall 3,350 2.80% $1,287 800 $1.61 0 30

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.8% 6.8%

SubmarketConditions


NonDowntownSaint Paul

Cities Included:

Saint PaulFalcon HeightsLauderdale

12

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.6% 6.2%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered


Market Rate 15,139 1.40% $ 979 801 $1.22 0 31Affordable 5,405 1.20% $ 794 800 $1.00 68 2

Mixed Income 2,381 1.70% $1,214 1,001 $1.22 0 (5)

Overall 22,925 1.40% $ 971 821 $1.18 68 28

WestSuburbs

Cities Included:

CorcoranCrystalExcelsiorGolden ValleyGreenfieldHopkinsLong LakeLorettoMaple Grove

MinnetonkaMoundNew HopePlymouthRobbinsdaleRogersSaint Louis ParkSpring ParkWayzata

13

Vacancy Rents

Q3 ’15 vs. Q3 ’14

5.6%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100

$1,200


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered



Mixed Income 1,839 1.00% $1,078 948 $1.14 0 (2)

Overall 33,308 2.00% $1,108 938 $1.18 248 420

0.0%

NorthSuburbs

Cities Included:

AnokaArden HillsBlaineBrooklyn CenterBrooklyn ParkChamplinCircle PinesColumbia HeightsCoon RapidsFridleyHam Lake

LexingtonLino LakesMounds ViewNew BrightonOsseoRamseySaint AnthonySaint FrancisShoreviewSpring Lake Park

14

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.1% 3.7%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered


Market Rate 19,709 1.80% $ 915 894 $1.02 0 (8)Affordable 2,133 0.90% $ 884 857 $1.03 0 0

Mixed Income 723 1.20% $1,227 979 $1.25 0 2

Overall 22,565 1.70% $ 923 893 $1.03 0 (4)

EastSuburbs

Cities Included:

Cottage GroveForest LakeLittle CanadaMahtomediMaplewoodNewportNorth Saint PaulOak Park Heights

OakdaleRosevilleSaint Paul ParkStillwaterVadnais HeightsWhite Bear LakeWoodbury

15

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.2% 4.0%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100


0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered


Market Rate 14,200 1.60% $1,019 925 $1.10 0 (5)Affordable 2,695 1.20% $ 833 882 $0.94 0 (10)

Mixed Income 982 1.30% $ 874 853 $1.02 0 (2)

Overall 17,877 1.60% $ 986 915 $1.08 0 (17)

SoutheastSuburbs

Cities Included:

Apple ValleyBurnsvilleEaganEast BloomingtonFarmingtonHastingsInver Grove Heights

LakevilleMendota HeightsNorthfieldRichfieldRosemountSouth Saint PaulWest Saint Paul

16

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.4% 6.0%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered



Mixed Income 1,587 1.30% $1,185 1,100 $1.07 0 10

Overall 28,796 2.00% $1,011 919 $1.10 113 57

SouthwestSuburbs

Cities Included:

Belle PlaineChanhassenChaskaEden PrairieEdinaJordan

New PraguePrior LakeShakopeeWaconiaWatertownWest Bloomington

17

Vacancy Rents

Q3 ’15 vs. Q3 ’14

0.1% 6.2%

SubmarketConditions


$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,300


0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%



Rental Type


Surveyed*

Average Vacancy

Average Rent Per

Unit

Average Unit Size

(SF)

Average Rent

Per SF

Number of Units

Delivered


Market Rate 15,578 2.90% $1,199 964 $1.24 246 178Affordable 1,579 2.00% $ 994 1,064 $0.95 0 35

Mixed Income 1,436 1.30% $1,171 1,018 $1.15 0 0

Overall 18,593 2.70% $1,184 975 $1.21 246 213

18

MultifamilyOverview

437.9k 261.8k $10.5b 111.7kApartment residents Occupied Apartment

homesEconomic

ContributionTotal jobs supported

How Apartments and Their ResidentsStrengthen the TCMA Economy

Living

In ApartmentsApartment Residents 437,850

Spending Power $3,567,744,058Direct Jobs Supported 32,429Total Economic Contribution $7,192,572,020Total Jobs Supported 83,720

Managing

ApartmentsTotal Apartment Homes 261,820

Operation Dollars Spent $993,028,089Direct On-site Jobs 6,634Total Economic Contribution $1,970,245,186Total Jobs Supported 16,451

Building

ApartmentsConstruction Dollars Spent $605,001,542Direct Jobs 3,491Total Economic Contribution $1,361,192,970Total Jobs Supported 11,543

Source: www.weareapartments.orgThis website offers this information for states, metro areas and congressional districts throughout the United States.

19

ConstructionTrends

Multifamily construction activity in the Twin Cities is on par with previous years. There were approximately 5,000 units delivered in 2013 and another 4,900 units delivered in 2014. Currently there are an estimated 5,000 units expected to be delivered by year end 2015. There were 2,545 market rate and 827 affordable units delivered through September 2015.

Currently, there are 26 market rate developments under construction in the TCMA, with a total of 5,010 units expected for delivery between 2015 and 2017. Approximately 60% of the units under construction are located in the suburban market, primarily in the South and West Metro areas. In addition to the projects currently under construction, there are 63 more developments in planning or proposed stages across the TCMA, which together total 12,137 market rate units. Areas with the greatest concentration of planned/proposed market rate developments are the West Metro (twelve projects, 2,738 units), South Metro (nine projects, 1,787 units) and Saint Paul (eight projects, 973 units).

For affordable housing projects, there are four developments under construction in the TCMA, totaling 392 units projected for delivery between 2015 and 2016. Nearly all of these projects are in the city of Minneapolis. In addition to the projects currently under construction, there are seven developments in the planning or proposed stages across the TCMA, which total 643 units.

Student housing construction near the University of Minnesota campus has slowed. There are no projects currently under construction, but there are five student housing projects that are planned or proposed, totaling approximately 1,309 units.

As of 2014, there were 823,780 Millennials in the Twin Cities (ages 18-34). According to the Census Bureau, approximately 25%, or 206,000 people, live with their parents. With the increase of job openings, we expect to experience a large number of Millennials finding employment, and moving out of their parent’s homes in the next few years. In addition, the millennial generation is projected to increase over the next decade as immigration picks up. They are looking for developments in walkable neighborhoods with amenities that accommodate their live-work-play lifestyle. These include amenities such as neighborhoods with a plethora of retail, entertainment and recreational amenities; access to public transportation; and properties with amenities such as concierge services, on-demand fitness studios, dog runs, media rooms and guest suites.

As many companies are moving their headquarters to the Central Business Districts (CBDs), the cities of Minneapolis and Saint Paul are working on ways to attract more residents to the area. In Minneapolis, there is currently a new Minnesota Vikings football stadium under construction that is scheduled to be completed in 2016. Additionally, there is a new downtown park that is being designed to help create more green space in the CBD, new schools are opening up in the downtown area and Nicollet Mall is being redesigned to be more pedestrian friendly. Saint Paul recently announced a new major league soccer stadium will be built along the light rail and a new baseball stadium for the Saint Paul Saints opened up in May 2015.

20

ConstructionTrends

Market Rate Developments Under Construction

Downtown Minneapolis4Marq Minneapolis 262Edition Minneapolis 195Encore Minneapolis 122North LoopDistrict 600 Minneapolis 78South MinneapolisZest Apartments Minneapolis 45University of Minnesota22 on the River Minneapolis 125Uptown Minneapolis2622 Lake Street Minneapolis 903118 W Lake Street Minneapolis 164Laguna Apartments Minneapolis 45St. Paul2700 W University Avenue Saint Paul 248Custom House Saint Paul 202Seven Corners Hardware Site Saint Paul 191Victoria Park (Phase II) Saint Paul 193Vintage on Selby Saint Paul 206West MetroThe Island Residences Minnetonka 174Overlook on the Creek Minnetonka 100Plymouth City Flats Plymouth 157The Shoreham Saint Louis Park 150North Metro610 West Brooklyn Park 484Cielo Fridley 260South Metro6725 York Avenue Edina 242Parkside at Gabella Apartments Apple Valley 196Luxembourg Bloomington 282Remington Cove Apple Valley 101The Springs Apple Valley 280

For more information, to correct information, or for a copy of the complete pipeline and maps, contact Erin Hartwig at [email protected].

21

ConstructionTrends

Affordable Housing Developments Under Construction

Downtown MinneapolisMill City Quarter Minneapolis 140North MinneapolisBroadway Flats Minneapolis 103Commons at Penn Minneapolis 45Saint PaulHamline Station Saint Paul 104


22

ConstructionTrends


Most Active Developers in the TCMA

Developer Number of UnitsDoran Companies 1,172Lennar 914DLC Residential 738Opus 702Sherman Associates 677Ryan Companies 571CPM Companies 516Mortenson Development 512United Properties 443Dominium 437

There were 24 sale transactions in the third quarter of 2015 totaling $225.7 million, bringing the year to date total to $732.9 million. The average price per unit in the TCMA in Q3 2015 was $132,405, a 29% increase from the previous year. The largest transaction by sales price in Q3 2015 was for Concierge Apartments (fka Crossroads at Penn). This 698 unit, Class B suburban project sold for $41,000,000, or $58,739 per unit.

Ten notable transactions from third quarter 2015 are detailed on the left. The transaction with the highest price per unit in Q3 2015 was Vélo, a 101-unit mid-rise apartment development in the North Loop neighborhood of Minneapolis. The total sale was $30,975,000, or $306,683 per unit. The largest suburban transaction was Marketplace & Main, a 53-unit, Class B mid-rise community in Hopkins, MN, which sold for $241,509 per unit.

Capital demand for multifamily assets is at an all-time high, especially for well-located Class A urban and first-ring suburban assets. Currently, the Twin Cities are on pace to exceed $1 billion in sales volume for 2015, which will break the record volume in 2014 of $937.2 million. Historically low interest rates, a surplus of capital, outstanding fundamentals and a lack of available product have contributed to a record low cap rate environment. Due to excess capital demand, investors have increased their risk tolerance, are paying higher prices and continue to broaden their acquisition criteria to include value-add assets, new development, pre-sales and suburban locations.

Institutional, private and foreign investors are drawn to the stability of the Minneapolis/Saint Paul multifamily market. This competition has driven cap rates down to the mid-to-low 4% range for well-located urban Class A assets. Class B urban, as well as Class A suburban assets will trade in the mid-to-low 5% range. Suburban Class B and C assets are experiencing cap rate compression as well. As cap rates continue to remain low, we anticipate more local owners will be enticed to sell.

23

SalesActivity

Notable SalesTransactions

Q3 2015

Vélo (2014)

City: Minneapolis

$/unit: $306,683

Marketplace & Main (2012)

City: Hopkins

$/unit: $241,509

Second Street Lofts (1915/1996)

City: Minneapolis

$/unit: $234,615

Calhoun Beach Apts (1926)

City: Minneapolis

$/unit: $147,577

2434 Dupont Ave S (1929)

City: Minneapolis

$/unit: $131,579

3411 Hennepin Ave (1922)

City: Minneapolis

$/unit: $130,769

1435 W 31st St (1922)

City: Hopkins

$/unit: $241,509

Groveland Terrace (1997)

City: Maple Grove

$/unit: $126,042

Provence Apartments (2001)

City: Burnsville

$/unit: $124,494

2446 Colfax Ave S (1930)

City: Minneapolis

$/unit: $118,060

(Year Built/Renovated)

Source: Real Capital Analytics

NAI Everest brings industry-leading resources to its disposition and acquisition services. Speed, agility, and keen insight are hallmarks of our services. The result is connecting properties with our exclusive list of investors and institutions. NAI Everest disposition services rely upon the skills and insight of our experienced team of brokerage, marketing and data resource management professionals. Our process begins with an internal launch meeting that unifies clients’ objectives with marketing and sales strategies. This launch is the beginning of a process that involves the following phases:

Comprehensive Property Profile - market analysis, competitive review, capital market summary

Marketing Promotional Strategy Development - advertising, direct mail, e-mail, web listings, and public relations tactical outline

Sales Planning & Execution - database profile analysis, identification of network connections, direct contact with exclusive list of buyers

Client Communication - communication of progress through activity reports and updates

Maximum Price - the result is the capitalization of market dynamics in achieving a competitive bid environment and the maximum sales price

About NAI Everest Gina Dingman, CCIMPresidentP. 612.424.7541M. 612.801.1855F. [email protected]

Brian ScholtenAssociateP. 612.424.8451M. 763.567.3226F. [email protected]

Nick NabokaAssociateP. 612.424.8453M. 612.229.8854F. [email protected]

Erin HartwigSenior AnalystP. 612.235.4902F. [email protected]

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NAI EverestTeam

4150 Olson Memorial Highway, Suite 110Minneapolis, MN 55422612.424.7542naieverest.com

Q3 2015

NAI EverestMultifamily Market Report

2015 3rd quarter twin cities multifamily market re...

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