Pandemic puts a small, hopefully short-lived dent in rental market
By Frank Jossi
The Harper, the new five-story apartment building at the corner of Selby and Snelling avenues, opened in March, just in time to suffer through the first few months of the coronavirus pandemic and the state-imposed lockdown of the economy.
Developed by Ryan Companies, the same firm that developed the five-story Vintage at Selby across the street, the Harper also weathered several nights of civil unrest following the death of George Floyd in South Minneapolis on May 25. First-floor windows were boarded up in fear of vandalism. Still, prospective tenants continued to tour the building, albeit at a slower pace.
The leasing of the Harper “has been going well in a tough time,” according to Joseph Peris, a manager of real estate development for Ryan. “We’ve gotten a good reception from the neighborhood. There’s definitely a demand for living in the Snelling-Selby area.”
Typically, new apartment buildings fill up within a year of their opening, but Ryan Companies expects it will take a good four to six months longer to fully lease the Harper. Due to the pandemic, many prospective tenants are opting to stay in their current homes, according to Peris. “Folks are becoming entrenched where they are; they’re a little stickier now then they used to be,” he said.
Apartment living continues to be an attractive option in the Twin Cities even with the pandemic-generated fears of denser living. The metro area’s apartment vacancy rate, which has been extremely low in recent years, still stands at 3.2 percent, according to Brent Wittenberg, vice president of Marquette Advisors, a real estate consulting firm and publisher of the quarterly Apartment Trends. However, he added, that vacancy rate may be artificially low because of the pandemic and the related government stimulus payments, additional unemployment benefits and the moratorium on apartment evictions.
Wittenberg remains bullish on the local rental market. The city of Saint Paul will see 3,500 new apartments built between now and 2022, he said, a much more aggressive pace than in the past seven years when developers added just 3,000 new apartments.
“We expect the market will respond very well to the new apartment products in Saint Paul, including the neighborhoods south of I-94,” he said. “These are appealing, walkable neighborhoods with ready access to goods and services, public amenities and significant employment centers.”
The Twin Cities was one of the first urban markets to recover from the economic recession of 2008, and Wittenberg believes that history will repeat itself once the threat of COVID-19 infection dissipates. However, the landscape will continue to be challenging for developers as the region delivers an estimated 9,000 new apartment units this year and potentially 30,000 new apartments over the next three years.
The leasing of the Harper “has been going well in a tough time,” according to Joseph Peris, a manager of real estate development for Ryan. “We’ve gotten a good reception from the neighborhood. There’s definitely a demand for living in the Snelling-Selby area.”
In July, Twin Cities landlords as a whole collected 86 percent of the rent due, which was substantially higher than the national average, according to Cecil Smith, president and CEO of the Minnesota Multi Housing Association. The rent collection was “beyond everyone’s expectations,” he said, and possibly due in part to the additional $600 per week federal government unemployment assistance. Smith also credited the moratorium on evictions and the industry’s decision not to charge late fees for rent or to impose rent increases for helping to stabilize the market.
The Twin Cities continue to have a critical shortage of apartments despite the many new multifamily buildings going up in the downtown, Uptown and Dinkytown areas of Minneapolis, according to Smith. “We still have full occupancy in the metro. That hasn’t changed,” he said.
Before the onslaught of COVID-19, the apartment market was so healthy that some buildings filled up a year ahead of schedule, he said. However, challenges remain, from the ongoing pandemic to the costly regulations imposed by Saint Paul’s new Tenant Protections Ordinance, he said.
The impact of COVID-19 pushed the usual spring rush for new leases into summer and forced policy changes within buildings, according to Brenda Hvambsal, vice president of marketing for Steven Scott Co., which manages 10,000 apartment units in the Twin Cities, including the Finn and South Highland in Highland Park. Many apartment amenities such as fitness centers, party rooms and theaters were closed for several weeks and only recently reopened at a limited capacity, Hvambsal said.
About half of the tenants understood the new limitations, but the rest were angry they could not use those spaces, she said. Landlords and property management companies have also had to adapt to new protocols, switching to virtual tours and appointment-only visits, requiring face masks on all staff and visitors, and reducing the potential touch points in buildings, she added.
The Harper’s management has held socially distant ice-breakers for new tenants outside of the building, Peris said. And with more tenants having groceries delivered, staff have found places to store grocery bags until tenants have a chance to pick them up, he said.
The Harper has attracted local college students, empty-nesters and others who mirror the residents of the surrounding neighborhood, according to Peris. “We’d like to be more leased,” he said, “but relative to everything that has happened, the interest we’ve seen is a testament to the product and the neighborhood.”
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