By Jeff Budish, Northmarq Three years in, and the COVID-19 pandemic has immensely altered how multifamily and commercial properties are utilized, located and valued. Now with interest rate changes, all product types have seen a hit from the change in the cost of capital. While challenges are on the horizon, Midwest markets, including Minneapolis-St. Paul, should see less shake up than elsewhere. Despite rising interest rates, recession worries and nagging inflation, the Twin Cities multifamily sector is resilient. Vacancies remain low, demand is outpacing supply and rents are solid. Year over year, apartment rents in the Twin Cities area are up 5 percent. While COVID changed the dynamics of all product types, it explicitly impacted multifamily. The increase in remote work meant employees were not tethered to a physical office. Many people moved away from their workplaces in densely populated areas to the suburbs. However, Minneapolis and St. Paul proper generally saw net outbound demographic shifts. Valuations over the past two years therefore didn’t include additional inflated pricing based on speculation of continual inbound movement. There is also soaring demand for apartments due to an increase in the number of Americans living on their own, roommate-free. In an AvalonBay public …
