The 77,300-unit Memphis apartment market continued to have the highest vacancy rate among the top Reis markets in the second quarter of 2012, but that rate was down 50 basis points from the prior quarter on 395 units of net absorption and no new supply. Although the Class B/C rate remains high at 11.8%, it is down 240 basis points from a year earlier and 70 during the second quarter. Moreover the Class A rate is down to just 5.1% after a 20 basis-point decline for the period. As a result new supply has started to revive. With 264 units already added thus far in 2012, more than in 2010 and 2011 combined, Reis reports 392 units still under construction—and 693 in planned projects with development schedules.
The 60-unit Van Vleet Flats completed construction in the Riverside submarket in Memphis in July, and the vacancy rate edged up 10 basis points that month. But Reis predicts the rate will fall to 8.3% by year-end as the 2012 net absorption total soars to 1,768, the most since 1998. Although demand is expected to be slower, and new supply greater in subsequent years, a 6.3% vacancy rate is forecast for year-end 2016.
Rents are low, but rising strongly. In the second quarter the average asking rent rose 1.0% to $703 per month and the average effective rent increased 1.2% to $659 per month. The year-over-year gains were 2.3% and 3.1% respectively, but Reis predicts strong increases of 3.7% for asking rents and 4.7% for effective rents for all of 2012, with increases around 4.0% per year for the 2013 to 2016 period. July saw an increase of 0.3% by both measures. The second quarter asking averages were $868 per month for Class A units, up 0.6% for the period, and $594 per month for Class B/C, up 1.2%.
“Overall vacancy in the Memphis metro will still remain among the highest levels in the nation—coming in at 10.3% for 2012 and expected to increase to 10.4% in 2013,” Multi-Housing News predicted.