Apartment units throughout the biggest metropolitan areas in Tennessee have rented quickly during the last three years. But a surge of new supply in Memphis, Knoxville and Nashville might result in a slowdown in multifamily absorption in the state’s most populated cities, according to the latest research from Marcus & Millichap.
According to Marcus & Millichap, builders have responded to the demand for apartment units throughout Tennessee, and have been especially busy adding new supply in the Knoxville and Memphis metropolitan areas.
Vacancy rates in these two markets, then, might not fall as quickly as they have in the past.
Marcus & millichap said that as of the end of the first quarter in Memphis, the vacacncy rate remained the same on a year-over-year basis. That rate stood a still-low 6 percent as of the end of the quarter.
And in Knoxville, the apartment vacancy rate rose 90 basis points to 4.9 percent in the first quarter this year when compared to the same period a year earlier.
Still, all three of Tennessee’s biggest cities are benefitting from strong apartment markets. Look at Nashville: The apartment vacancy rate here fell to 5.4 percent as of the end of the first quarter. That’s down 20 basis points when compared to the same quarter a year earlier.
Nashville apartment rents continue to rise, too, jumping 7.5 percent in the first quarter when compared to the same quarter a year earlier. The average effective rent in the Nashville market soared to $1,201 a month, according to Marcus & Millichap. That’s the fastest rents have grown here since the middle of 2016.
In Memphis, the aveage effective apartment rent climbed 5.5 percent on a year-over-year basis to $848 a month, while in Knoxville rents jumped 2.7 percent during the same period. The average effective apartment rent hit $879 a month in the Knoxville market.
Tennessee will see plenty of new apartment units in the coming months. Consider Memphis. Marcus & Millichap says that more than 1,160 units are under construction here. The largest project multifamily project underway in the Memphis market is Irene Woods Apartments in Collierville, which will contain 432 units.
In Nashville, 4,360 apartments are under construction. The largest project is The Revere at Hidden Creek in neary Gallatin, which will contain 444 units.
And in Knoxville, more than 1,350 apartments are underway, according to Marcus & Millichap. The average project size here is 272 units.