The Coming Downtown Apartment Bust – By the Numbers

PHOTO Anthony 92931. Source: Wikimedia Commons.

PHOTO Anthony 92931. Source: Wikimedia Commons.

I’ve been distracted enough by the cold and holiday parties, I’d forgotten about the downtown apartment building boom.  That is, I forgot until I found myself chatting with an architect working on the apartments part of that giant, recently approved, Downtown East project at a holiday party last weekend. We started talking about what amenities are “required” to have a competitive market-rate building.

I’ll admit, I’m one of those people who want our city to gain population, and I welcome the cranes. But our conversation was tacitly implying that there is escalating demand for amenities, based in a sense of unease about how long this trend can last.  Burl Gilyard’s article “What’s driving the Twin Cities apartment mania?” is a great place to learn a bit about the current boom and the reactions to it.

One of the most common reactions is a disbelief that apartments within walking distance of downtown will be able to command a significant price premium over more distant apartments, especially considering that hundreds of new apartments are being marketed simultaneously.

The initial reaction to this situation, from an Economics 101 perspective, would be that with expanded supply, intense competition, and a finite demand, the price for apartments should be dropping, or at best holding steady.  And depressed prices should, at some point, have a chilling effect on the rush to create more supply.  The more skeptical observers and developers quoted in Gilyard’s article seem imminently reasonable, especially considering the recent collapse of the condo market.  Nevertheless, apartments in near-downtown neighborhoods keep getting leased, built, and proposed.  Not in that order, of course, but new proposals like the 400 units in Ryan’s suggests that people with money to invest are still betting that there will be continued demand for additional Downtown apartments.

The question on the mind of the skeptics seems to boil down to this: who will rent all of these apartments?  Or more specifically, who in their right mind would pay $1,200 for a studio apartment in a new building downtown, when they could rent the same apartment with similar amenities several miles from the downtown core for $800?  Is a downtown location really worth a $400 price premium?

One reason to consider paying the extra $400 is that commuting is a pain, or at best a chore.  Consider two versions of yourself clocking out at 5, and how their evening starts.  Here are the schedules for how your two selves get to spend the first hour after work.


Suburban You Urban You


Depart work, walk to parking ramp Depart work – walk to apartment


Exit parking ramp – drive to highway Make quick stop (on foot) for a few groceries


Continue driving Arrive at apartment, change into swim suit


Continue driving Swim


Make quick stop for a few groceries Hot tub


Arrive at apartment Start grilling dinner on the pool deck

Having enjoyed a 20-minute walk (including a stop at the grocery store), and a dip in the pool and/or hot tub, the downtown you is relaxed, happy, and starting to grill dinner on the pool deck by 6 pm.  The office isn’t that far away, but an hour after leaving work, you’re already in a different world, and it’s a darn good place to be.

The suburban version of you is not as happy, having just spent much of the post-work hour navigating traffic in a series of concrete-lined trenches, hoping that rain, snow, or accidents don’t cause a delay.  At 6 pm the suburban you is miles from work geographically, yet still feeling the stress of the day.  But you’re $20 richer ($400 monthly rental savings / approximately 20 weekdays in the month) for having made the commute, so it’s a smart investment.  Or is it?

For the sake of comparison, let’s say that the suburban you has a car (virtually mandatory to maintain the suburban lifestyle), while the urban you hasn’t yet gotten around to replacing the car after it died a while back.  You happened to read a blog like this one right before your last car bit the dust, and you decided to go a few months before buying a replacement.  Months turned into years, and here you are.  Your urban persona bridged the gap with a car-sharing membership.  Not owning a car means you don’t have to pay for a parking space at home or at work, and you end up spending about $150/ month to make a trip or two each week.

The chart below compares average monthly costs for housing and owning or sharing a car.

  Suburban You Urban You
Car payment/car sharing costs









Average monthly maintenance & repairs



Parking space lease in downtown ramp



Monthly Rent






No offense, but the suburban you is starting to look very bad at math. You don’t actually prefer sitting on the highway in traffic to relaxing in a hot tub, do you?  Because you’re not saving any money by commuting, which means you’re doing roughly an hour of extra work, every day, for free.  Remember, the first chart in this post only covered the evening commute.  Your suburban self also had to wake up 20-30 minutes earlier than your urban self in order to make time for the morning commute.

That’s why you, and thousands of people like you, are fueling a downtown housing boom that has some people scratching their heads.  What’s already obvious to you will become apparent to more and more people over time.  And this is why I’m hoping the current apartment boom might defy the skeptics and become the new normal.

About Janne Flisrand

Janne Flisrand spends her time thinking about how people interact with the space around them. Why do they (or don't they) walk or bike or shop somewhere? How do spaces feel? Why do people sit here and not there? Why bus instead of bike, bike instead of drive? What sorts of spaces build community, and what sorts kill it? Can spaces build civic trust and engagement?

12 thoughts on “The Coming Downtown Apartment Bust – By the Numbers

  1. David LevinsonDavid Levinson

    I agree for city workers, living in town makes sense. Most metropolitan workers do not work downtown, and the average commute to work duration is only 22.3 minutes for Hennepin County as a whole. Employment in the core cities (not CBDs) is essentially unchanged over 5 decades:

    St. Paul Minneapolis
    1970 170490 265090
    1980 176900 268600
    1990 172578 278438
    2000 188124 308127
    2010 175933 281732

    Of course if all Minneapolis workers lived in Minneapolis, transportation would be much easier.

    1. Alex CecchiniAlex Cecchini

      True, but using the 2010 Census “On the Map” tool, the ~469k (slightly different than your data, but close enough) jobs in Minneapolis and St Paul proper represent 30% of the ~1.58 million jobs located in the 7 county metro area. That’s pretty significant. Further, about 153,500 of the people who work in Mpls/St Paul live in one of the 2 cities – 32.7%. By contrast, Minneapolis and St Paul comprise just 3.9% of the 7-county land area.

      It’s tough to overstate how much land-use regulations and major freeway (with access) investments over the past 60 years have made it possible for people to live and work outside the core cities (not just CBDs), and far less appealing to live/work in the 2 major cities themselves for many people.

      Also, the 22.3 minutes commute for drivers most likely represents drive time (unless I’m mistaken), not taking into consideration walking to the car, scraping it in the winter months, etc. But other rigors could be applied.. since parking costs are usually bundled in the salary for non-downtown employees they don’t perceive it, many don’t have a car payment, etc etc.

    2. Alex

      The logic of this post actually applies to living in suburban job centers as well, which often have as much or more retail, schools, and other miscellaneous things of life than downtown Minneapolis. So it makes sense that the downtown apartment boom has also sent some shrapnel to some suburban “downtowns” like Southdale, Park Place and Rosedale. If those places were actually enjoyable for walking as well as destination-rich (in other words walk-friendly as well as walkable), they’d probably be seeing even more apartments going up right now.

      1. Janne

        Alex, I really like this point. As someone who seldom leaves Minneapolis other than to go to St. Paul (with a lengthy suburban pleasure bike ride thrown in now and again), I hadn’t thought about that point. But as you say, the logic of living near work and trading the convenience of a car for the pleasure of free time works at any location. It’s really about residential/job proximity.

    3. Matt SteeleMatt Steele

      It is essentially unchanged during the period of the suburban experiment. Now that the experiment is over, companies will adapt or suffer.

      I know of a financial services firm that recently moved hundreds of people from the city to a suburb. I know of people who loathe their new 45 minute commute, the added expense of a car (instead of biking to work or taking the bus), and the lost opportunity to indeed break the clown-like car habit. Attrition at said company is high… people are leaving to find jobs downtown.

      1. Morgan

        I am sure that losing some staff was understood as part of their decision. But for every staff person that is unhappy I bet there are three that like the new location more. A lot of people live in the suburbs, a lot of people with private sector work experience and skills. Way more than live in the cities.

        While I agree that the market is changing, it is actually pretty marginal, the suburbs are not going away.

  2. Adam MillerAdam

    That’s about how I look at it. Also, I get some built in exercise going too and from work, and I can walk to most of the stuff I need because most of what I need is available in walking distance.

    As to what’s going to happen to all those apartments, some will get changed over to condos, which have to make a comeback eventually and start to look more attractive as rents go up.

  3. Paul udstrand

    You forgot, it’s gonna cost $200 – $400 a month to park your suburban car downtown, so the higher rent isn’t so much.

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