Apartment Construction Boom (2011-??)

[John]

It was inevitable the market would slow down. There are just so many people who can afford these very high rents. And if you can afford it, this is an excellent time to buy a condo or home because interest rates are so low. These higher income people have many nice options in the current real estate market.

The apartment project I think about most in the future glutted apartment market is the gorgeous 1368 Lasalle building under construction. The architectural quality of it is so high; it really feels like a condo project being built under the guise of luxurious apartment building. I may be wrong, but I wonder if Magellan ( or someone else) may attempt to convert this to a condo project (when all is said and done) if the upscale rental market becomes oversaturated.

[MplsTodd]

Does anyone know the history of the apartment buildings of the 1960s? Every block seems to have a few buildings like this one on it. They seem to be everywhere in Minneapolis. How was this possible at a time when the suburbs were booming and the city was losing population. The apartment boom today doesn't seem close to having an impact that these buildings have on neighborhoods.

Can anyone offer more insight to this vague question?

I remember seeing a report in the Minneapolis Municipal Library (in City Hall) published sometime in the early 1960s, with the title like "4,000,000 residents by 2000" or something like that. A substantial increase in population was envisioned. So, my guess is that the city recognized it would be losing hundreds or thousands of households to freeway construction and tried to make up for it by encouraging higher density housing in the city. Those mundane apartments are the result.

[min-chi-cbus]

Those mundane apartments are the only affordable places to rent in some parts of the city though (like West Calhoun), so they certainly serve a purpose, as will these modern $2/SF apartments being built today.

As for the apartment market slowing, I think that goes without saying. There is NO WAY the Twin Cities can sustain the current (or former) frenzied pace of new proposals and construction. If it did, it wouldn't take long before the city started to look like a completely different place with a completely different feel. I'm not saying it's impossible but this is the kind of thing that's happening in Dallas, Houston, Atlanta, Seattle, etc., and unfortunately we're just not that "popular". I don't think the market will "bust" though. For one thing there are completely different dynamics at play and there is no "false market" boosting these developments and greedy consumers with the promise that apartments can never be unprofitable (i.e. "housing will always appreciate"). We're also in the thick of a recession -- or very very stablized economic period -- and if/when the market inflates again there will be much more $$ to go around and a whole 'nother round of speculative luxury apartment development. Why developers are incapable of building "affordable" apartments is beyond me though.....every one of these guys are catering to the upper end of the market, and once its saturated they throw in the towel. WHAT ABOUT THE REST OF US???

[aeisenberg]

Looks like a great time to buy real estate.

[mattaudio]

You can rent the non-new apartments that will be more affordable thanks to increased rental supply in the market. If you think there's opportunity where other developers don't see it, you can become a developer and convince people to invest in projects that build "affordable" apartments. You can buy a dirt-cheap condo and probably pay under $800 a month for a 2br in many areas.

Not really sure why people expect developers to build "affordable" housing. The nature of a housing market is that there are certain areas where the market commands $1500/mo for a 1 br, and certain areas where you can get a 2 br for $500/mo.

At one point in time, I bet all those "modern" 60's apartments were more expensive than the brownstones which were likely slummy and outdated at the time. Now many of those brownstones have been upgraded or are even condo conversions, and its the 60s-vintage apartments that are affordable.

[min-chi-cbus]

You can rent the non-new apartments that will be more affordable thanks to increased rental supply in the market. If you think there's opportunity where other developers don't see it, you can become a developer and convince people to invest in projects that build "affordable" apartments. You can buy a dirt-cheap condo and probably pay under $800 a month for a 2br in many areas.

Not really sure why people expect developers to build "affordable" housing. The nature of a housing market is that there are certain areas where the market commands $1500/mo for a 1 br, and certain areas where you can get a 2 br for $500/mo.

At one point in time, I bet all those "modern" 60's apartments were more expensive than the brownstones which were likely slummy and outdated at the time. Now many of those brownstones have been upgraded or are even condo conversions, and its the 60s-vintage apartments that are affordable.

I expect developers to exploit the market and build where they can make a profit. My point was why can't developers turn a profit on affordable housing? I realize the margins might be lower, but there's CERTAINLY demand there for it, so I know that's not the issue. I think developers, like most of us, are greedy.

And I would LOVE to be my own developer, and if I was, I'd like to figure out a way to build housing for all -- not just the upper class.

[rufus7]

"
And I would LOVE to be my own developer, and if I was, I'd like to figure out a way to build housing for all -- not just the upper class."

please define 'upper class'. It can't be "someone who pays the market rate", otherwise we all are 'upper class'.

[PhilmerPhil]

So can anyone offer any more insight to the apparent aprartment boom of the 60s?

[min-chi-cbus]

John maybe...

[MNdible]

So can anyone offer any more insight to the apparent aprartment boom of the 60s?

Meg Tuthill.

(Seriously.)

[FISHMANPET]

I expect developers to exploit the market and build where they can make a profit. My point was why can't developers turn a profit on affordable housing? I realize the margins might be lower, but there's CERTAINLY demand there for it, so I know that's not the issue. I think developers, like most of us, are greedy.

Why build an apartment that rents for $1/sqft when you can build and sell an apartment that rents for $2/sqft for much less than double the cost of the $1/sqft building? Once that $2/sqft market is saturated we might see some movement on the lower end, though I don't know at what point a project becomes not profitable for new construction.

[John]

So can anyone offer any more insight to the apparent aprartment boom of the 60s?

Meg Tuthill.

(Seriously.)

Yes, someone who knows a lot about the history of The Wedge and Whittier neighborhoods. To be sure, the demographic influence in the 60's of the Baby Boom generation played some role ( like The Millenials in the current apartment boom). I also think the apartment buildings may have been part of a strategy to remove properties the city considered blighted, and as a way to attract people back to the city (at a time when it was losing significant population).There must have been a large pent up demand for rental property...the postwar 1940's and 1950's saw a great deal of homebuilding and less rental construction.

[twincitizen]

As an aside, those 60s-era 2.5 story apartment buildings may not be architectural beauties, but they are a big part of what defines those neighborhoods (Whittier, Wedge, CARAG, etc) and make successful places like Uptown and LynLake possible. I live in Whittier and I love the fact that my plain jane apartment building is surrounded by $300,000 houses and duplexes. The vast majority of them provide much needed "affordable" housing without any subsidy whatsoever.

[TWA]

Successful condo developments often follow a number of apartment projects. Renters move into a neighborhood and those who live there for a number of years may want to stay and buy their own condo. Being these projects take over a year to complete, I wouldn't be surprised if condo projects are announced as a lot of these apartments come on line.

[twincitizen]

Strib article talking about how the low vacancy rate has not wavered, despite all the new units.

http://www.startribune.com/business/189520261.html

[John]

Strib article talking about how the low vacancy rate has not wavered, despite all the new units.

http://www.startribune.com/business/189520261.html

That's great news and bodes well for all the apartment projects going up. Makes me wonder if the downtown population will approach 40.000 in the next few years?

[twincitizen]

And another one from F&C: http://finance-commerce.com/2013/02/twi ... ep-rising/

This one raises a little skepticism, mostly due to the timing of all of the units hitting the market at the same time. Uptown has 4 projects under construction right now that will all be hitting the market within 6-9 months of each other (Track 29, Elan, The Walkway, and 2900 Lyndale aka LIME). Elan Center and West blocks are already approved for another 400 or so units, probably pending the pre-leasing for the existing stuff. That is a lot, but I am pretty optimistic about the demand for Uptown, especially right along the Greenway.

[Nick]

The lowest vacancy rate in the metro is Brooklyn Center, where Marquette Advisors reports a vacancy rate of 1.2 percent.

Who'da thunk?

[twincitizen]

Boom goes the dynamite: http://www.startribune.com/local/minnea ... 69261.html

[Nick]

Boom goes the dynamite: http://www.startribune.com/local/minnea ... 69261.html

Two immediate knee-jerk reactions: 1) The "Visit Brainerd" commercial before the video is adorable 2) Almost all the quotes in the article make me cringe.