Memphis, home of the Blues and Elvis Presley’s “Graceland”, is the largest city in the state of Tennessee with a population of 676,646. Tourists are drawn to the downtown Memphis entertainment district, anchored by the world famous Beale Street, NBA basketball with the Memphis Grizzlies, and AAA baseball’s finest ballpark, home of the Memphis Redbirds, the St Louis Cardinals farm team. Coming soon is Bass Pro Shop’s gaming retail store and museum, which will attract outdoors enthusiasts.
With more than 50,000 people working in the medical industry, Memphis is internationally recognized for its contribution to the medical field. Located in the Medical District, is St. Jude Children’s Hospital, ranked the No. 3 children’s cancer hospital in the country by U.S. News, Le Bonheur Children’s Hospital nationally ranked in many different specialties, the Regional Medical Center of Memphis, one of the top trauma centers in the country and the University of Tennessee Center for Health Science.
With its centralized location in the middle of the country, Memphis is the home of many distribution facilities and hubs, most notably FedEx as well as other Fortune 500 companies. The Memphis Chamber of Commerce expects to add more than 7,000 new jobs in 2012.
Apartment market development ended 2011 on a positive note with a total of 580 units being delivered to the market, well above 2010, but still short of average historical numbers. There are 1,812 units in planning stages for 2012 according to REIS. The majority of all planned units are located in Class A areas such as Germantown, Collierville and Downtown Memphis.
Class A submarkets continue to see improved occupancy levels along with modest rent increases. Class B and C assets have not seen a significant recovery from economic downturn, and still show signs of stress for higher occupancy levels in the metro area. The low-income housing market has dominated development with significant assistance through the Hope VI and Section 42 programs, with the goal of improving the affordable housing options in the city. The most recent and significant change that will effect multi-family development is the surrender of Memphis City School charter causing the merger of the city and county school systems. This will allow smaller, suburban municipalities to commence the implementation of their own school systems and create demand for housing in preferred school districts.
The recession and changes in banking and financing slowed down the market rate development in all sectors, including multifamily, in 2011. New government rules, along with lower interest rates should open more development opportunity and help developers turn some of those planned projects into multifamily assets. Memphis has also seen a large number of out of town investors start to find value in redeveloping B and C assets with success.
Low acquisition cost, bulk purchasing materials, low cost construction labor and an experienced management firm opens the door to value add opportunities with low-income non-performing distressed assets. Memphis multifamily development and growth should see strong improving numbers at the end of 2012.
— Curtis Braden is a senior associate in Marcus & Millichap’s Memphis office.