MARKET SNAPSHOT: Recent Knoxville, Tenn. Caps Close in on 2007 Rates

Knoxville, Tenn.—Cassidy Turley recently announced the sale of the 208-unit Bristol Park in Oak Ridge, Tenn. for $18.3 million, or slightly less than $88,000 per unit.

The cap rate was 6.5 percent on trailing numbers, according to Scott Tyrone, vice president of multifamily investments in Cassidy Turley’s Nashville, Tenn. office, who represented both parties in the transaction and notes that this was aggressive.

“We’re not to the price per units that we were in 2007, but cap rates are probably where they were in 2007,” he points out.

A deal in 2007, for example, which included 236 units, sold for $22.87M, or $96,000 per unit, noted Tyrone, while a 208-unit deal in 2009 traded at $76,000 per unit.

“If you took this property and put it in Charlotte or Nashville, the cap would be 6 or lower than 6,” Tyrone tells MHN. “That’s what drives a lot of these investors to these tertiary markets; they are able to get better yields, better returns, higher cap rates.”

Overall, though, since the metro area is so small (overall MSA population is approximately 684,000), “it’s not a roller coaster ride as it is in some of the bigger cities,” according to Tyrone.

Only two properties, representing about 450 units, are currently under development—with development focused mostly in the west and to the north—and the Bristol Park deal is the only apartment community that has traded since October 2009.

Nearly 100 percent occupied, Bristol Park’s average rent is $854 per month, which is at the high end of  average metro-wide monthly rents, which range from $352 to $856.

Meanwhile, the average metro vacancy is 7.2 percent, up slightly from the five-year average of 6.6 percent. Similar to other markets, Tyrone notes, “concessions are burning off and occupancies are getting better but no one is really raising rents yet.”