During the third quarter of this year, the Memphis multifamily market slowed down compared to the second quarter. Rent and construction were up, however, occupancy and sales fell during the third quarter.
“We’re seeing continued improvement in our market,” says Tommy Bronson, III, vice president of the multi-housing group in CB Richard Ellis’ Memphis office. “Due to record low construction levels, we’re seeing positive rent growth, occupancy and concessions burning off.”
The overall occupancy in the third quarter of 2011 was 91.6 percent, compared to 92.1 percent in the second quarter. The strongest submarkets are Germantown/Collierville, Downtown and Cordova, which all average in the low- to mid-90s for occupancy, Bronson says.
“In those locations, we are often seeing no concessions now, which is a big deal in the Memphis market because we’ve been a concessionary market during the last few years,” he says.
Bronson adds that Class A and B properties are pushing rents because concessions are burning off. Rents for new construction rose from $939 per unit in the second quarter of this year to $960 per unit in the third quarter of this year, an increase of 1.8 percent. Overall rents also increased slightly, from $733 in the second quarter of this year to $735 in the third quarter of this year.
The largest decrease from the second quarter to the third quarter was sales, which fell drastically. After a strong second quarter with 14 sales totaling 2,943 units and $104 million, the third quarter only had four sales totaling 1,129 units and $40.37 million.
“During the past 2 years, our primary sales were mostly REO or distressed properties sold on a price-per-pound basis,” Bronson says. “This year, we’ve seen some stabilized, Class A properties coming into the marketplace and being received very well by the investment community.”
Bronson adds that so far this year, CB Richard Ellis has closed four Class A deals compared to only one last year.
In the second quarter, 114 units were delivered compared to zero the previous quarter, and 196 units were completed in the third quarter. Despite the small additions to the market, Bronson says construction has been the slowest area to recover from the recession.
“Construction is at an all-time low,” Bronson says. “There are a few planned developments here and there but they seem to keep getting pushed back for whatever reason. Even going out of 2011 and into 2012, we’re not expecting robust construction.”
Bronson says that the increase in the job market will help it continue to improve. In the first half of the year alone, 10,000 new jobs were added to Memphis.
“I anticipate fundamentals to continue to strengthen in occupancy, concessions continuing to burn off and true rent growth,” Bronson says. “That’s what we’ve seen gradually during the past 2 to 3 quarters and I expect for that trend to continue.”
— Savannah Duncan