As I sat in the last row (so I could sneak out early) of The 2008 Minnesota Real Estate Journal’s Apartment & Condominium Summit at Golden Valley Country Club last week, I realized that in this room full of brilliant and established real estate investors, there was just one question we all needed answered; What is the future going to look like for the Minneapolis/St. Paul Multifamily industry?

Below are some of the highlights of the Summit as well as interesting tidbits to chew on:

First off, the state of our current National economic conditions:

  • National Vacancy Rate is between 6-8% respectively
  • 5-6% Cap Rates Nationally
  • Ages 18-36 make up the majority of the renter core
  • 25% of total renters are immigrants
  • Office employees make up the majority of renters for apartment buildings
  • People who are being foreclosed upon are moving into Single Family Rentals
  • Rental Rates will continue to be flat for at least 18 months
  • Any Rental Rate increases will be based on the Consumer Price Index

Current and Future Outlook of the Twin-Cities Metro:

  • Sub 5% Vacancy Rates Metro Wide
  • Great Investment fundamentals in place
  • Lots of buyers with Few properties on the sales block
  • Investors Looking for Value-Add Opportunities
  • Cash on Cash returns 8-10%
  • Tenant Retention is Key
  • Lenders are still a little tight and their Debt Coverage Ratios are 1.20-1.25 and 80% LTV’s are the absolute max
  • Utilities are now starting to be passed on to renters in some complexes
  • Senior Housing Rentals is now stable and ready for New Construction to peak it’s head out
  • Green Design is Very Hot
  • Lumber Construction Prices are falling but other costs are still on the rise

One other large thing to consider is the Twin-Cities Market was named a “Market to Watch” as Institutional Investors are starting to pour their money into current and future multifamily projects here.

As for the Condominium portion of the Summit, I walked out early and went to focus on growing my apartment portfolio along with the other 95% of the crowd. Enough said on the outlook for The Condo Market.