VOL. 133 | NO. 63 | Wednesday, March 28, 2018
Middle of the Road
By Patrick Lantrip
When it comes to the Memphis apartment market, it’s steady as she goes, according to technology and analytics company RealPage. In 2017, the apartment housing market in Memphis experienced rent growth of 2.3 percent, ranking 26th out of the top 50 metropolitan areas in the U.S., according to RealPage’s data.
“The word that we’re going to return to over and over again when we’re describing the Memphis market is going to be ‘stable,’” Greg Willett, chief economist for RealPage, said. “It’s not a stellar performance, but we are in a stage in the market where a lot of the money sources like that in-the middle-of-the-road sort of performance that you can just count on year after year.”
As chief economist, Willett works with RealPage’s real estate industry research and analysis team and its data science group to track market fundamentals in the U.S. on the national, metro and neighborhood level.
The Citizen apartments at Union Avenue and McLean Boulevard are among the projects underway in Midtown in the multifamily sector, which remains stable, RealPage data shows. (Daily News/Houston Cofield)
2017’s rent growth percentage of 2.3 is consistent with the city’s market average of 2.1 percent since 2010 and 2018’s expected rent growth of 2.2 percent.
“It’s not necessarily a bad story to be in the middle of the pack as long as it’s consistent,” Willett said. “If you can count on that revenue year after year, that’s to some degree a compelling story.”
Willett likened the Memphis market to other constantly steady performers such as Philadelphia, Baltimore and San Antonio.
“They’re never at the top of the list, but at the same time they are not at the bottom of the list,” he said. “They just kind flutter along in that middle range for performance.”
The top performing markets, according to RealPage’s data, were the Sacramento, Roseville, Arden-Arcade area in California with 6.5 percent growth in 2017, the Las Vegas, Henderson, Paradise area in Nevada with 5.7 percent and Jacksonville, Florida’s 5.4 percent.
However, when it came to occupancy, the Memphis metro didn’t fare as well. The city’s occupancy rate of 93.1 percent at the end of 2017 ranked 48th out of the top 50 metros. RealPage attributed these figures to a large stock of obsolete Class C units that bring the overall numbers down.
“What we really see on the rental housing side is that Memphis is a place that does have a fairly sizable block of somewhat obsolete product in not-great neighborhoods that really kind of holds down the overall performance,” Willett said. “But if you’re in the right niche, you will outperform these overall kind of lackluster numbers for Memphis.”
He said areas such as Midtown, Downtown, East Memphis, Germantown and Collierville all fall into the latter category.
The Providence/Warwick metropolitan area in Rhode Island and Massachusetts and the Minneapolis, St. Paul, Bloomington area in Minnesota and Wisconsin tied for the top occupancy markets in 2017 at 97 percent, while the Newark, Jersey City area in New Jersey and Pennsylvania came in third with 96.8 percent.
RealPage found that Germantown and Collierville not only outperformed in the renal rate category, they were also responsible for a lion’s share of new construction in the Memphis market.
“Though completion volumes fell in Germantown/Collierville in 2017, there were roughly 800 units underway at the end of 2017,” RealPage’s Lindsey Allen wrote in her market report. “That represents about 80 percent of the metro’s total construction volume.”
As for the rest of 2018, Willett predicts more of the same for the Memphis metro.
“We’ve got occupancy holding about where it is right now as I look at our calendar year and forecast, and the forecast overall rent growth number is 2.2 percent, which is almost identical to where it is right now, so no big change there,” Willett said.