MARKET SNAPSHOT: Apartment Demand Falls in Memphis, Causing Vacancy Rate to Flatline
By Philip Shea, Associate Editor
In a market that has not been too friendly to multifamily over the past decade, demand in 2011 ticked slightly downward from a record-breaking performance of 1,149 unit absorptions in 2010. The year closed with about 800 units absorbed, higher than the annual totals from 2006 to 2009 but not enough to bring overall vacancy below 10 percent.
Meanwhile, permits for new construction also lagged—falling from 846 new units in 2010 to 463 new units in 2011. The 2011 figure is considerably lower than the annual average of 617 units seen over the past three years and dramatically lower than the average of 1,804 units seen from 1999 to 2007.
However, Hendricks & Partners reports that renewed job growth in Memphis will likely continue over the next two years, with annual gains of around 2.5 percent. The city saw the number of jobs increase 1.4 percent in 2011, this following three consecutive years of contractions.
Among the 30,000 jobs expected to be added through 2012 and 2013 will be positions in administration/support services, hospitals, specialty trade and professional/technical services. Additionally, Hendricks & Partners notes that the city has been dubbed the top logistics, distribution and shipping hub in the U.S. by Business Facilities, and that companies such as Electrolux, IDEXX and Trane will be expanding employment in these areas over the next few years.
Yet overall vacancy in the Memphis metro will still remain among the highest levels in the nation—coming in at 10.3 percent for 2012 and expected to increase to 10.4 percent in 2013. The Shelby Forest/Frayser area reported the highest submarket vacancy rate in 2011—at 26.6 percent, while East Shelby County reported the lowest submarket vacancy rate—at 5.0 percent.
Average rents in Memphis increased by 2.0 percent in 2011, a four-year high and coming in at $699 per month. The average price per unit also rose considerably from just below $20,000 to around $35,000. The downtown area posted the highest average rent of $983 per month, while South Memphis posted the lowest average rate of $409 per month.
Meanwhile, single-family home sales fell substantially by 11 percent in 2011, while new home sales dropped 32 percent as buyers tended to favor bargains in the existing market. Furthermore, the median price for a home fell 6.4 percent to $92,000 in the Memphis metro—reflecting continued difficulty in that sector of the economy.
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