But the scene is changing rapidly as of the end of the year, according to Cindy Bagaus, a spokeswoman for Colliers Towle. Local apartment owners expect vacancies will hit 8% to 10% at year-end, and that rents will drop more than the 5.5% reported for third quarter 2001. And, concessions such as one to two months of free rent are showing up in all types and sizes of apartment units across the metro area.

The reason for the downturn is that the economy began to soften in the spring of 2001, prompting renters to move in with family or double up with roommates. At the same time, interest rates started to drop and renters left the market to purchase homes. Also,conditions tightened for corporations with master lease apartment units. Of course, the events of Sept. 11 intensified these trends, throwing the economy into recession, prompting more layoffs, and further depressing interest rates.

The areas with the most softness are outside the two urban cores of Minneapolis and St.Paul in the western suburbs (especially Maple Grove, Plymouth, Minnetonka), Dakota County (Burnsville), and Washington County (Woodbury).

Although much of the vacancy in these areas is in class A apartments, class B and C units will be soon be affected in the metro area with a trickle-down effect much like what happens in the office market -- when class A starts discounting rates and pulling fromclass B, which in turn pulls from the class C market.

For the third consecutive year, 2001 saw a decrease in apartment sales, which again is a direct result of the low supply of appropriate product.