The multifamily housing market rental rates are slowly returning to pre-pandemic numbers in Memphis.

Jeremy Chism, CBRE vice president in investment sales multifamily, said CBRE is seeing rental rates normalize after the spike of rates that came out of the COVID-19 pandemic. 

In the Q2 2023 Memphis Multifamily market report from CBRE Research, the average monthly rent was $1,219 per month, a 1.6% growth quarter-over-quarter.

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“This year, we are seeing ... overall, I would say, a healthy market and supply and demand seems to be well in check,” Chism said. “Hopefully, we will meet those lower inflation numbers. We’re definitely seeing it come down.” 

Chism said one of the challenges facing the multifamily market nationwide is inflation. He said increased expenses have driven rental rates up.

“When a water heater goes out, (there’s) higher costs to upgrade units, higher costs to replace (appliances),” Chism said.

However, Chism said post-pandemic growth rates have offset many of the costs coming from inflation. 

And in Memphis, one benefit to the multifamily market is most ownership groups are local.

“This year, we are seeing ... overall, I would say, a healthy market and supply and demand seems to be well in check. Hopefully, we will meet those lower inflation numbers. We’re definitely seeing it come down.”

Jeremy Chism
CBRE vice president in investment sales multifamily

“Having local owners, local developers that live in the community, we see where the needs are, and we’re hitting those needs,” Chism said. “We’re not over-saturating one market or one submarket. That’s definitely a strength that Memphis has that a lot of other cities don’t necessarily.” 

Chism believes the multifamily market will remain consistent in the next couple of years. 

“Both (the operating side and the investment side of the industry) will tend to moderate in the future, and I think we won’t have as high of operating costs going forward,” Chism said. “I think we’ll start to see a little bit more moderation and consistency, and it all points to a real healthy market.” 

Tim Argo, Mid-America Apartments’ chief strategy and analysis officer, said not many apartments were being built during the pandemic but demand and rents were high.

According to the CBRE Research data, capital and construction markets remain slow due to the interest rates. There are 10 projects under construction in the Memphis area, and six have their leases up, also known as a pre-leasing period.

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Argo agrees developers have started building more since the end of the pandemic, and supply is increasing this year. He said he expects this to continue into next year.

“A number of new apartments are being built, quite a bit more than what it was the last couple of years, and that brings more supply and kind of balances out that supply-demand dynamic,” Argo said. 

There are still challenges with building new apartments, including high interest rates, the cost of materials and the cost of financing, Argo said. The industry is also aware of changes in consumer preferences as younger generations rent.

Fogelman Properties president Mark Fogelman said the multifamily market has been steady but not as strong as the past three or four years. He said the market is “leveling off” when looking at occupancy rates and pricing. 

“Occupancies that had reached 96% or so are probably down to the 94% to 95% range,” Fogelman said. “Pricing has been leveling off. Some of it is due to the overall economy cooling off.”

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According to CBRE Research on the Memphis multifamily market, average occupancy rates decreased from Q1 2023 to 92.4%.

Fogelman, like Chism, said the biggest challenge to the multifamily market in Memphis is “the economic uncertainty in the air these days.” He said the fear of a recession makes consumers more hesitant and more likely to stay put. 

Some could consider buying a home, but Fogelman said home-buying “really isn’t a factor” because interest rates are up. 

In Memphis, high employment and Downtown attractions have made for a stronger multifamily market, Fogelman said. 

“With everything going on Downtown, all the recent improvements to Tom Lee Park and in other areas, it’s a great place to live, and it’s brought more apartment residents there,” Fogelman said.

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Fogelman Properties is in 33 markets and 13 states; out of those, the Memphis market has been one of its best performers in the last couple of years, Fogelman said. 

“More people are choosing Memphis as other cities have gotten more expensive,” Fogelman said. “I think Memphis is now a good alternative to Nashville since Nashville has gotten much, much higher housing prices and a lot of traffic.”