Memphis Occupancy Rates, Rents Trending Higher, Say Apartment Managers

The head of a Memphis-based company that manages 21,000 apartment units -- 5,000 of them in Memphis -- says multifamily apartment properties are experiencing their biggest bull market in 10 years.

Meanwhile, CB Richard Ellis Memphis reported multihousing in Memphis had a flat performance in the first quarter after a strong 2010. But its "Marketview" forecast improvement because of recent job announcements and an improving economic outlook.

The two biggest reasons multifamily apartment communities are excelling are declining homeownership rates and a lack of new construction of competing apartments, said Mark Fogelman, president of Fogelman Management Group.

"Over the past 12 months we've seen our portfolio-wide occupancy move from 91 percent to about 95.5 to 96 percent," he said.

Meanwhile, the rent Fogelman-managed apartments asks has risen 3 to 5 percent.

In the Memphis area, Fogelman's units have averaged 96 percent occupancy over the past three months, he said.

The strongest submarket is Collierville, where Fogelman has Legacy Farms, Bailey Creek, Madison at Schilling Farms and Dogwood Creek. So far this year they've been 97 percent occupied, on average, "with very few rental incentives being offered,'' Fogelman said.

In Downtown Memphis, Fogelman manages perhaps the most upscale apartment building in Memphis, Metro 67. The former Union Planters bank building started leasing in early 2010. It offers high-end finishes like granite countertops, hardwood floors and designer cabinets.

Despite rates that average $1,500 a month and climb to $2,000 to $2,500 for two- and three-bedroom units, Metro 67 is 96 percent occupied, Fogelman said.

But rebounding strongest may be the Southeast Memphis submarket, which had been the worst-performing area the past five years.

"It has come back very strong over the past six months," Fogelman said.

Many of the area's 30 to 40 apartment communities have been shored up, stabilized, made safer and now have occupancy rates of about 95 percent, he said.

"We manage three properties in that area totaling 1,100 units. They're fully occupied," Fogelman said.

The conditions may seem ripe to stimulate construction of new apartments.

Financing has become available, but borrowers now must have the cash to make bigger down payments than before, Fogelman said.

Typically, new developments take two to three years to complete. "Even if everybody turns on the switch ... you won't see meaningful new products in Memphis until at least the second half of 2013," he said.

Three quarters have passed since new units have been built, the CBRE Memphis report states.

But 851 units are scheduled to be completed by year's end.

CBRE Memphis shows that occupancy in the Memphis area was 91.6 percent in the first quarter, about the same as the last quarter of 2010.

The average rent was $727, down 1.6 percent from late 2010, the report states.

New, incoming employers like City Brewing, Electrolux and Mitsubishi Electric will create 5,000 jobs over the next five years, increasing demand for apartments, the report states.

Article written by Tom Bailey Jr for the Commercial Appeal 5/29/2011