Vacancy rates are “next to nothing” in Downtown Minneapolis, according to Dylan Garrison of Downtown Resource Group.
That’s primarily because of interest from millennials and baby boomers, real estate agents say.
Millennials are beginning to make good money, have kids and settle down, according to Cynthia Froid, principal of the Cynthia Froid Group, which specializes in the Downtown market. Baby boomers, she said, are looking to downsize from properties that don’t necessarily make sense for empty nesters.
“Both these hugely powerful consumer groups are literally fighting for the same properties,” Froid said. “That is creating this feeding frenzy.”
There were fewer than 120 active condominium listings Downtown in early April, compared to 600 in April 2007, according to David Arbit, director of research and economics for the Minneapolis Area Association of Realtors. He said there was roughly three weeks of housing supply in the North Loop at the end of 2016.
Experts typically define a balanced market as five to six months of supply, Arbit said.
“We’re having to change our yardstick,” Arbit said. “Measuring in feet just doesn’t work anymore. It’s a fourth-and-inches situation.”
Average rental rates have increased, too. The average Downtown rate increased 3.4 percent and 3.15 percent in the first and second quarters of 2016, respectively, according to the firm NAI Everest. The average monthly rent Downtown was $1,547 in the second quarter of 2016, compared to $1,074 in Southwest, according to city data.
St. Anthony Main, the North Loop and the Mill District tend to be the hottest areas Downtown, according to Garrison, who works out of the North Loop. People also look for housing in Loring Park and by the new U.S. Bank Stadium, he said.
People used to call about Uptown, Garrison said, but now start by asking about the North Loop. He said the appeal is the walkability of the area, noting that some households are going from two cars to one.
Jessica Prudden, broker for the firm Prudden & Company, said a lot of baby boomers like the fact they don’t have to care for a large home. She noted the restaurants and retail shopping Downtown and the “the ease of the lifestyle” as draws for the area.
“There are definitely clients who want to go to the Chain of Lakes,” she said, “but most want to go Downtown and want to be around the action.”
Two bed, two bath
Froid said millennials and baby boomers ask for the same things when it comes to units: Two bedrooms, two bathrooms and one or two parking stalls. She said she is seeing a lot of “accidental renters” — people who want to purchase Downtown but can’t find anything.
“A lot of people have sold their properties, and they’re just sitting with money in their pockets ready to buy,” she said. “It’s just a matter of finding it.”
Many of the buyers are from the Chain of Lakes area and western suburbs, she said. She added that a lot of people are relocating to Minneapolis from cities such as Denver, Los Angeles and Chicago.
“People are just shocked at how expensive prices have gotten here,” she said. “It’s great for sellers, but it comes at a cost for buyers.”
Fritz Kroll of Edina Realty said there are a lot of renters who move Downtown to see if it’s a good lifestyle for them. He said there previously were a lot of condos for rent from individual owners, but that pool has dropped significantly.
The rental market is similar to the sales market Downtown, Prudden said, with a limited supply and many deals happening o the market. Average rent is roughly $2.55 and up per square foot for apartments Downtown, she said.
At The Encore, a luxury apartment building that opened Dec. 1 in the Mill District, rents range from about $1,640 to $9,350, according to its website. The 122-unit building was over 50-percent leased as of April 13, according to Patrick Carson, leasing director for DRG, which oversees sales for the building. He said he expects the building to be fully leased by mid-summer.
The Encore features condo finishes and condo-quality construction and is the only luxury apartment building in the Mill District, Carson said. Many renters are empty nesters, and some are renting for a year or two until they find the right property to buy, he said.
A few are going to move into The Legacy condo development that is under construction. The 374-unit condo will open in summer 2018, according to Froid.
Working with a realtor
Millennial Hallie Lundell moved into Skyscape Condominiums in Elliot Park in March after searching for a couple of months. The 25 year old, a contract public relations professional, said she wanted to be closer to work and didn’t realize that buying was such a great option.
She said could see herself in her condo for “a decade plus” and that her building is good about allowing residents to rent out units, should she or her boyfriend be transferred for work.
Lundell worked with Lynn Burn, a realtor in Froid’s group, to find her unit. She said it was nice to have someone helping her who does this process every day.
Both Froid and Prudden said they would recommend that buyers work with someone who knows the market, noting how many properties are traded before they hit the internet.
“It’s hot, it’s exciting, and it’s been really fun watching Downtown evolve over the past few years,” Prudden said. “It’s been so much fun being in the industry.”
— Dylan Thomas contributed to this report