Multifamily Sales Activity in the Twin Cities Surges in the First Quarter

The Minneapolis-St. Paul multifamily market entered 2025 on solid footing, supported by strong renter demand and a more moderate pace of new development. Vacancy improved to 4.8%, down 40 basis points year over year. Net absorption reached 2,600 units in the first quarter, above totals from both the prior quarter and the five-year average. Urban and suburban vacancy rates held steady for three consecutive quarters at 5.3% and 4.2%, respectively. Rent growth resumed after a brief dip, with asking rents rising 1.0% quarter over quarter and 2.4% year over year to $1,565 per month. Maplewood posted some of the strongest annual rent growth among submarkets at 7.4%. Development is normalizing after several years of elevated deliveries. About 1,100 units came online in the first quarter, with completions on pace for 4,400 units, consistent with pre-2020 norms. The construction pipeline remains steady at 6,000 units, down 57% from peak levels in 2023. Permitting tracks closely to historical averages, indicating a slower pace of new development ahead.

The market opened 2025 with notably strong investment activity, posting the second-highest first quarter sales volume by both dollar volume and transaction count since 2022. Sales were up 54% year over year, reflecting renewed investor confidence and optimism about the market’s stability. Pricing reached a recent high, with the median price per unit climbing to $203,700, a 65% increase from the median for 2024. Cap rates continued their downward trend, averaging 5.8%, driven by continued improvement in operating performance and tightening fundamentals. The mix of transactions remained broad-based across all asset classes, though investor appetite for Class A assets has trended higher.

Overall, solid fundamentals, compressed cap rates, and a normalized development pipeline position the Twin Cities as one of the more attractive and resilient multifamily markets in the Midwest.

Looking ahead

The Minneapolis-St. Paul multifamily market is positioned for continued improvement throughout 2025. A slowdown in new development, combined with resilient renter demand, is expected to support further tighten market fundamentals. Vacancy, which improved to 4.8% in the first quarter, is forecast to hold steady or decline modestly as absorption continues to outpace new supply. Rent growth is expected to accelerate in the coming quarters. Asking rents, up 2.4% year over year in the first quarter, are forecast to increase by 3.2% for the full year, reaching approximately $1,600 per month by year-end. Strength across both urban and suburban submarkets, especially areas with heightened rent gains over the past year, will drive this momentum. Deliveries are projected to total approximately 4,400 units for the year, well below the peaks from 2021 to 2023 and closer to historical norms. With the construction pipeline near 6,000 units and permitting aligned with long-term averages, supply side pressures should remain limited.

On the investment front, the market had a strong start in the first quarter and is expected to sustain robust activity throughout the year. Although sales volume may moderate in the coming quarters, transaction levels should remain above recent averages, supported by declining cap rates, which moved down to an average of 5.8%, and improving fundamentals. Investor interest is likely to continue across all asset classes, with growing activity in Class A properties, reinforcing the Twin Cities multifamily market as a resilient and attractive destination for both operators and capital providers. Overall, 2025 should bring balanced growth marked by low vacancy, steady rent increases, and solid investment activity, with potential opportunities emerging from evolving migration trends and shifting demand patterns.

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