While COVID-19 has been rough on the major metro multi-family housing sector, it hasn’t had the same bite in the Tri-Cities. Conditions vary from stable to slow growth. And the 2021 outlook varies from bullish to optimistic. So far, the multi-family and rental market – like the overall local housing market – has benefited from the economic effects of the pandemic. The demand is being driven by COVID-19 and approval of a casino in Bristol, VA.
The national multi-family outlook is for gradual recovery as the nation claws its way out of the COVID-19 black hole.
Locally, about 500 units are now leasing, pre-leasing, or under construction, according to reports from the Tri-Cities Apartment Association and developers. The average local rent is $850. And like home prices, rents have been increasing faster than wages.
CASINO WILL RAMP UP HOUSING DEMAND
There are also pending deals in the Bristol TN-VA area that were contingent on approval of the casino referendum’s approval that are not on the books, yet. The casino and growth it creates will increase demand for housing in a region that already has record-low inventory rates.
The first wave of that increased demand will come from the casino and other developments’ construction phase. The projected casino completion date is 2022. During that time, the casino’s demand will expand Bristol’s sphere of influence in both housing markets and the region’s overall economy.
The Twin Cities’ housing market has already seen housing demand increasing. During the 12 months ending in mid-November, its market share of higher-priced existing home sales has outpaced all but the Johnson City area market. There has also been an expansion of large multi-family developments that are now full.
BULLISH ON KINGSPORT
Kingsport Alderman James Phillips is a bullish voice for more Kingsport multi-family development – especially Class A apartments like the Town Park Lofts, the Overlook an Indian Trail, The Retreat at Meadowview, and The Villas at Riverbend. Phillips has and is developing more apartments in Kingsport, but not the larger communities. His developments are smaller than the Class A communities that boosted Kingsport’s apartment capacity by over 700 units and are currently at 90% and above occupancy.
MIGRATION TIGHTENS UP LOCAL MARKET
Shane Abraham, president of Universal Developments and Construction (UDC), says, “The flexibility of remote work coupled with the ability to live cheaper and with fewer restrictions and muted the COVIC effect in many metro areas. Surprisingly, we have seen small ripple effects of this throughout East Tennessee in our multi-family communities. “It has tightened up a fairly healthy market and created a lack of availabilities. “The question will be how this plays out in the immediate future and beyond. “Hopefully, much of that migration hitting smaller markets like East Tennessee is here to stay.”
The Johnson City area multi-family sector has historically had some of the highest multi-family rates in Tennessee. UDC and Mitch Cox have recently broadened the multi-family presence to the Bristol area to complement their existing properties in Johnson City, Piney Flats, and Kingsport.
Abraham looks for 2021 to be very similar to this year, with limited new multi-family supply hitting the market and the migration trend continuing, but on a smaller scale.
KINGSPORT’S DEVELOPMENT GAP
Phillips said his multi-family communities are at 100% occupancy and have “always been that way.” He recently bought lots and plans to develop more of the smaller communities in Kingsport and Church Hill.
“There are a lot of hidden gems in the small and medium” multi-family market. And “you can’t get enough two-bedroom housing” in the Kingsport market.
But there are some rough spots. Much of the inventory was built either 40 years ago or in the last two years. It’s a problematic development gap, according to Philips.
“I haven’t heard any rumbling of anyone looking at building larger apartment communities” in Kingsport. I would like to see Kingsport go more toward a Johnson City model where new apartments come online in an annual or two-year cycle. “We going to need new development to keep up with demand.”
Redevelopment of some of the older complexes is also an option. One such option is underway at the Kingsport West community in Allendale.
Several market watchers say there are ample examples of local investors buying and upgrading developments where investors have not maintained them. And parts of the larger communities owned by out-of-state firms are question marks. There have been some upgrades, but the trend has been to reduce staff and increase rents to boost or sustain profits. The short-term practice of working off the churn by offering move-in incentives is also prevalent.
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Categories: REAL ESTATE