By DON FENLEY
KINGSPORT, Tenn. – The no vacancy signs may not be posted at Tri-Cities apartment complexes. But that’s the condition that prevails. Separate reports from the National Association of Realtors (NAR) and the Tri-Cities Apartment Association (TCAA) show the region have the second tightest market in East Tennessee. Finding an apartment is the first chore. Then there’s the rent.
NAR’s vacancy report shows Knoxville has the tightest market with the lowest vacancy rate of 2.9%. Kingsport-Bristol’s rate is 3.34%. Chattanooga has a 6.75% rate. It was 6.03% in Asheville. Moody Analytics reports the national rate at 4.7%.
According to NAR, “While most metro areas had their vacancy rate increase since the start of the pandemic, a few managed to decrease their vacancy rate. South Bend experienced the most occupancy rate gains since Covid, lowering its vacancy rate by 6.6%. Some other cities which saw their vacancy rate decrease the most include Peoria (-5.1%), Baton Rouge (-4.8%), Kingsport (-4.6%), and Charleston (-4.3%).”
Multi-family housing has become one of the local top-performing commercial assets this year. There have been 15 multi-family sales tracked by NETAR’s Commercial Multiple Listing Service (CMLS). During the first seven months of last year, there were two.
There have also been multiple sales to investor groups in Kingsport, Johnson City, and Bristol. And investment groups like ValCap have bought land for new multi-family developments. Several of those projects are still in the process of getting zoning approval.
ValCap owns The Landings, Allendale, Bradley Mills, Crosscreek, and Brandy Mill in Kingsport. It also recently acquired Promise Landings in Abington. Residents of that complex were shocked when their new landlord raised the rents for one-bedroom apartments from $900 and month to $1,050. Rents for a two-bedroom unit were bumped from $1,050 to $1,150. Like others, ValCap has been aggressively raising rents to match market rates in other markets.
Shane Abraham, founder and principal of Universal Development and Construction (UDC) in Johnson City, recently said the region didn’t attract large outside firms in the past because rents were low compared to other markets. The apartment market exploded this year in concert with a local housing shortage. The UDC website lists local holdings at 28 apartment and townhome developments. Abraham thinks the current conditions are not likely to run out of steam but will stabilize with the region’s slow job growth.
Kingsport Alderman James Phillips is celebrating the latest addition to his properties on Arch Street this week. The new 14-apartment complex is part of 80 apartments and houses he has built and/or remodeled in the Roller, Arch, and Branch St. area.
Philips wears several hats while discussing rental properties. He’s a developer, a landlord, and a city official concerned about the local housing shortage and rents rising faster than some locals can afford – especially working-class individuals. The $800 rent for his new one-bedroom apartments illustrates that commitment. That’s anywhere from $200 to $400 a month below what some major apartments and older complexes are charging. His two-bedroom units went for $1,200 a month.
The current Moody’s Analytics commercial property outlook says multi-family housing nationwide has been robust. “Performance metrics remain tight, with asking and effective rents posting near-record highs in the first quarter of 2022,” according to Victor Calanog, head of CRE Economics at Moody’s.
He thinks workforce housing could be an investment opportunity despite the upfront costs to modernize dated apartment units. A report on Moody’s outlook quoted him saying, “Depending on how you measure it, we have a housing shortage of anywhere from 2 million to 5 million units at the national level. Add to that strong growth numbers for both single-family home prices and multi-family rents, and you have a situation where large parts of our workforce need not just more housing, but also more affordable housing.”
The need for affordable housing outpaces supply locally and across the nation. Washington Co.’s current Attom Data Solutions Affordability Index says the average working person in that market cannot qualify to buy a median-priced home. Sullivan Co.’s affordability has declined for the last 15 quarters. CLICK HERE for that report.
Adaptive reuse, modular construction, and preservation are important tools in addressing the housing crisis, according to Moody’s. The biggest impact may come from public-private collaboration, such as big tech and healthcare employers working with local governments to develop workforce housing. That topic hasn’t been widely discussed locally, yet.
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Categories: REAL ESTATE