Accelerated Sales Pace Continues, Development Pipeline Expands
With 2016 closing at the Twin Cities market’s highest watermark in terms of total dollar sales volume ($1.5B), expectations for 2017 were somewhat moderate. Q1 2017 transactions are trending above $250M in sales volume. Activity is keeping pace with expectations from the past two years.
On the development front, last year witnessed a relative dip in units delivered at 3,290. We are expecting 2017 to deliver above 5,000 units, placing multifamily new delivery at its highest point during the current cycle. Some of this is due to projects that did not reach completion at the end of 2016 as anticipated, but is an important data point given the consensus that we are approaching the top of the market cycle.
This holds true for urban and suburban properties. Everything from sprawling garden-style properties in suburbs like Richfield and Bloomington to small, well-located brownstones in Uptown and Lowry Hill have been successfully renovated.
Another notable trend relates to affordable housing transactions. With the sheer number of Section 42 developments built in the late 1990s to early 2000s, many properties are reaching their 15-year compliance window. With owners contemplating whether to re-syndicate tax credits, opt-for a qualified contract (if permissible) or sell, the shadow market for Section 42 properties is large. We expect to see more of this type of property trade in the coming years.