From The Journal
By Sarah McKenzie and Tim Sturrock
North Loop neighborhood a hot spot for new apartment development.
The city’s apartment construction boom is especially strong in the North Loop neighborhood.
Old warehouses are undergoing rental conversions and major new projects are underway that will transform the fast-growing neighborhood.
The newest project to open its doors to residents is Soltvå — a new six-story, 100-unit apartment development at 701 N. 2nd St. The developer behind the project is Curt Gunsbury, president of Solheim Companies. His group developed the Solhem apartments in Uptown and has some projects near the University of Minnesota.
The boutique apartment building in the North Loop has a modern Scandinavian look — a nice contrast to neighboring old brick warehouses that have undergone condo conversions. Rents at the Soltvå range from around $1,175 a month to $2,300 — a reflection of the high demand for apartments in the neighborhood.
So far the building is about 60 percent leased, Gunsbury said, adding interest has been strong for remaining units.
The development has several environmentally conscious features — including a communal vegetable and herb garden for residents, organic waste disposal, a passive solar design, green roofs and a rain barrel irrigation system.
Gunsbury said his team is “actively planning” another project in the neighborhood, but wasn’t ready to disclose the location.
Greco has two other apartment projects underway in the North Loop on Washington — the Copham apartments at 607 Washington and another one under construction at 730 Washington Ave. N. Other notable rental projects in the pipeline include a development next to the Fulton Brewery, an apartment tower above the future Whole Foods at Hennepin & Washington, the Velo apartments at 103 N. 2nd St., and a proposal for a new five-story development at the long-stalled Reserve condo site.
While many apartments will soon come online, the rental market remains very tight and competitive. The price for apartments is also steep. The average rent in Minneapolis (outside of downtown) is $858, according to a recent report by Marquette Advisors. The average rent downtown, meanwhile, is $1,277.
“It’s kind of a fight to the death to see who can get the property before the next person,” said Dylan Garrison, a leasing agent for Downtown Resource Group, which rents out condos for owners who want to wait for better market conditions before selling.
This year, he has taken commitments from several potential tenants who haven’t even been inside the apartment they want, relying instead on videos recorded by Garrison. Last year that happened every few months, but now once or twice a month tenants are willing to rent an apartment without stepping inside.
“It was kind of rare a couple years ago, but now it doesn’t surprise me at all,” he said, adding that he’s heard clients complain about “how much there isn’t, how little inventory there is” in Minneapolis.
But high demand has only come after the housing market crash, sending many former homeowners toward rental properties and discouraging others from buying, said Minneapolis Housing Policy Director Tom Streitz.
He remembers only 10 years ago when landlords commonly offered a first month’s free rent or big screen TVs to potential tenants.
“When they are giving away stuff to get you to rent it’s a big deal,” he said.
Now, building permits in Minneapolis are again the highest in the metro area bringing in more apartment buildings to absorb the demand.
According to U.S. Census figures, nearly 5,000 housing units were permitted from 2005 to 2011 making Minneapolis the city in the metro area with the most construction permits each year during that time. Streitz said that trend will continue as the low vacancy rate attracts developers.
Scott Parkin, owner of Hoffman Parkin Urban Realty, said renters can expect years of low vacancy rates, even as more apartment buildings come on line.
“It’s a three-year process from the day you think ‘I’m going to build a condo,’ and people walk into their apartment. It’s a very slow progression for the real estate market to meet the demand,” he said.
Aside from a lack of supply, what complicates things for a lot of apartment hunters is a lack of a standardized go-to website to view apartments, or even high-end apartments, which is the case in larger cities like Chicago.
“Everybody is looking at Craigslist, my website, everything is totally willy-nilly,” he said. “The minute you put stuff online, if it’s priced correctly, it will go in a matter of a day.”
By the numbers
Average rent: $1,277
Vacancy rate: 1.9 percent
Minneapolis (outside of downtown)
Average rent: $858
Vacancy rate: 1.9 percent
Development pipeline, 2012-2015
Downtown: 1,503 units
University of Minnesota area: 830
(Source: Marquette Advisors market update)