Q4 2022 Multifamily Real Estate Report: Memphis, TN
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According to the Bureau of Labor and Statistics, Memphis’ employment grew by 3%, and hourly wages rose 7.5% year-over-year.
Memphis’ population has declined slightly for nearly a decade, while the larger metro area has increased by an average of 0.56% over the last four years.
The unemployment rate was on par with the national average at the start of Q4 2022, around 3.7%.
As job opportunities continue to expand in Memphis and the larger metro area sees a rise in population, Memphis multifamily demand should hold.
General Area Overview & Demographics
Memphis, Tennessee, is a culturally diverse city with a population of 628,127 people as of 2021. According to the U.S. Census Bureau, approximately 60% of the population is African American, and 38% are White. The remaining 2% of the population comprises primarily Asian, Native American, Hispanic, and other ethnic groups.
According to the American Community Survey conducted by the U.S. Census Bureau in 2018, the median household income in Memphis was $38,636, significantly lower than the national median income of $61,937. The poverty rate in Memphis was 27%.
The median age of residents in Memphis is 34. Approximately 21% of the population is between 18 and 24 years old, and 43% are between 25 and 44 years old. The remaining 36% of the population comprises people aged 45 or above.
It’s home to several higher educational institutions, including the University of Memphis, LeMoyne-Owen College, Rhodes College, and Christian Brothers University. The University of Memphis is the city’s largest institution of higher learning.
Popular tourist attractions include Graceland, Sun Studio, Mud Island River Park, and the National Civil Rights Museum at the Lorraine Motel. The Memphis Zoo is one of the most well-known attractions in the city.
Memphis has a humid subtropical climate with hot and humid summers, mild winters, and plenty of annual rainfall. Average summer temperatures can range from 80°F to 94°F while average winter temperatures can range from 46°F to 59°F. The city receives an average of 54 inches (137 cm) of precipitation yearly.
Summary of Memphis Multifamily Real Estate Performance in Q4 2022
Occupancy for multifamily real estate in Memphis declined from 94.8% to 93.5% quarter-over-quarter, below the national average of 96%.
Class A had the highest occupancy of 94%, Class B posted at 93.4%, and Class C was 93%. Absorption was down across every asset class in Q4.
In total, a negative 790 units were absorbed, with Class B making up over 50% of that. Every submarket had negative absorption.
What are multifamily rents like in Memphis?
Monthly rent declined from $1,199 in Q3 2022 to $1,196 in Q4 2022, making Memphis one of the more affordable states for commercial real estate.
Downtown Memphis had the highest Class A rent of any submarket in monthly price and price per square foot, $1,686 and $1.76, respectively.
Class C properties found the lowest monthly rent in West Memphis at $789. The overall average across all submarkets was $1,643 for Class A, $1,127 for Class B, and $827 for Class C.
Purchase & Leasing Activity
By the end of the second quarter of 2022, Memphis’ average price per unit for multifamily real estate grew by 10% to $90,700.
In Q3 2022, MLG Capital acquired Preserve at Bartlett, a 300-unit property in a Memphis submarket, and Preserve at Southwind, a 306-unit property in the city.
Sales year-to-date are at $1.05 billion.
New Multifamily Real Estate Development Activity in Memphis in Q4 2022
There was nearly a total of 2,500 units under construction in Memphis in Q4.
These developments took place across five submarkets, and all of them were for Class A builds.
Downtown Memphis had the most units under construction of any submarket at 825 in the pipeline.
Market Forecast for Memphis’ Multifamily Real Estate Market
Memphis’ multifamily market cooled throughout Q4, but this was on track with expected seasonal changes.
After those changes settle, and the new expected product is strategically delivered in submarkets found in Memphis that have lacked multifamily units in the past, Memphis is positioned to sustain healthy levels of supply and demand throughout 2023.
Takeaways for Multifamily Real Estate Investors
Memphis provides a low barrier of entry for investors considering the market, with its price per unit being significantly lower than the national average while maintaining rising rents, a larger metro area with a modest population increase, and a growing job market.
Stay diligent and happy investing.
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