Solid Southeast Apartment Markets
Some of the larger Southeast apartment markets are seeing record occupancy showings and rent growth rates ahead of the national average.
Occupancy and rent performances across these markets have ramped up in recent months as leasing activity has jumped alongside hiring. Employment growth of roughly 4% to 5% in past the year has each local employment base about 2% or less from pre-pandemic levels. General strengthening in underlying fundamentals has bolstered performances in many of the previously underperforming market segments, including luxury units.
In turn, occupancy in all of these markets is well above the essentially full mark and the most sailable rent growth is mostly showing up in the upper-tier units.
Atlanta has the best rent growth showing among the larger Southeast apartment markets. At 19.8%, annual effective asking rent growth here is the best performance this market has ever recorded. While price increases are high across the board compared to long-term averages, the rate increases in the Class C stock were at just 9.1% in the year-ending September. This was well behind the rates topping 22% in the Class A and B units.
Since the start of the COVID-19 pandemic, apartment demand in Atlanta has increased notably. In fact, only Dallas/Fort Worth and Houston logged more net demand in the past few quarters. Supply has also been ramping up in Atlanta, but not enough to keep pace with demand. This scenario has pushed occupancy up 140 basis points (bps) in the past year to 97.1%. This was also a record for the market.
Rent growth was also sizable in Nashville, at 15.9% in the year-ending September. This is not only a record for the market, but it’s nearly double the last market peak of 8.3% from November 2010. As in Atlanta, the biggest rent increases were in the Class A and B apartment stocks, which saw price growth of roughly 18% in the past year. While the Class C units saw a more moderate pace of 7.8%, that was still well above historical norms for that product class.
Occupancy growth has been notable in Nashville, growing by 230 bps in the past year to stand at 97.3% in September. This occupancy showing was achieved despite the fact that Nashville has been one of the fastest growing apartment markets in the nation in the past decade. The existing apartment stock has grown by over 40% since 2010, with that pace coming in behind only Charlotte and Austin.
Knoxville was one of the best apartment occupancy performers in the nation in September, with a rate of 98.8%. This was a record for the market. Demand has been robust in Knoxville recently, at the same time that supply has held to modest levels. Helping spur demand, the employment base here has now fully recovered from the pandemic downturn.
With very few vacancies available, operators in Knoxville have been pushing rents notably. At 13%, annual rent growth here was more than double the market average from the past five years. Class A rent growth has driven price increases in Knoxville, registering at a stunning 24.6% in the year-ending September. Rent growth in the other product lines were more reserved, though still strong, historically speaking, at nearly 9% in Class B stock and close to 4% in Class C units.
Memphis is typically a slow-and-steady market and has held up relatively well throughout the pandemic. A stable job base, heavy in logistics and transportation, which became essential during the lockdowns in 2020, helped Memphis persist. In fact, the job market in Memphis is only 0.3% away from full recovery back to pre-pandemic norms. The U.S., on average, is still 3.4% away from February 2020 levels.
September occupancy was at 97.2%, the highest ever in Memphis, and about 110 bps above last year’s level. Annual rent growth was also solid, at 13.7%. Class A rent growth led the charge here, growing 19.2% in the past year. Price increases were also solid – though more muted – in the Class B stock (12.5%) and int eh Class C units (6.3%).
For more information on the apartment markets in the Southeast, including forecasts, watch the webcast Market Intelligence – Southeast Region.