On the surface, San Francisco and Memphis don’t appear to have a lot in common. Even beneath surface, they really don’t have much in common, either. But one of the few traits they do share is that occupancy among luxury stock in both markets is higher than in other product tiers. They’re the only two major markets in the nation where that is true. The more affordable Class C product holds a commanding occupancy premium nationally, while luxury Class A product has struggled more under heavy completion volumes in recent years. While Class A stock in Memphis has held onto its top spot for the past decade, luxury units in San Francisco just recently inched their way into the lead. Helping Class A occupancy remain on top, neither market has experienced the large new supply boom seen across many markets during the current economic cycle. Since the beginning of 2010, the existing base in San Francisco has grown by 9.1%, while the increase in Memphis was a little lower at 7.1%. Both were well under the national average of 13%. But there are, of course, other factors unique to each market. They include the chronically under-supplied housing market coupled with high incomes in San Francisco, and the relatively affordable Class A stock in Memphis. Effective rents were at $1,276 in Memphis in 3rd quarter. Only three other markets nationwide commanded less expensive Class A rates: San Antonio, Cleveland and Greensboro/Winston-Salem.
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