Renewed interest in the city's core, new developments and limited housing supply are leading to increased property values.
Prices to buy and rent Midtown homes and apartments continue to climb as new development in the area has sparked renewed interest in the city’s core.
However, multiple proposed mixed-use projects that would bring new apartment units to Midtown have stalled, putting more demand on existing home and apartment inventory.
Over past couple of years, single-family home prices have risen to record levels, with planned apartment projects like MRG’s Madison @ McLean and Belz Enterprises’ Midtown Market at Union and McLean avenues pushing rental rates above $1,000 per month in an area that hasn’t seen any new multifamily construction in a decade.
The newest product on the market is The Bristol, which went up in 2004. Most of the apartment buildings in Memphis date back to the mid-century or even the turn of the century.
Fueling the increases in home prices and rents is the redevelopment of Overton Square, Crosstown Concourse, Broad Avenue and the expansion of the nearby Medical District.
Loeb Properties has sought to buy the Turner Dairy site near Overton Square for a future mixed-use project.
“It’s almost a perfect storm of synergy in everything that would make property values rise for an area,” said Sam Goff, Independent Bank vice president of mortgage and president of the Midtown Memphis Development Corp.
“Also impacting the property value increases is a lack of new construction, putting increasing pressure on existing stock.”
Goff cites an example of how home prices have increased over the past four years with a home he owns near Overton Square. Four years ago, it would have likely sold for $70,000 to $80,000, today it is worth a minimum of $130,000.
According to Chandler Reports, Midtown home sales averaged $172,000 in the third quarter. That's a 21 percent price increase from the same period last year.
A big change from several years ago has been a dwindling number of for-sale signs throughout the community.
“Inventory is limited. We’re starting to see more for-sale signs, but it’s not because of declining property values or because people are about to enter foreclosure on their homes,” said Goff. “It’s because homes are going for more than the asking price if it’s a well-maintained home.”
With the uptick in property values combined with low interest rates, many people are also refinancing their homes. Goff added that investors are quickly snatching up Midtown homes and flipping them.
Several expected Midtown multifamily projects have stalled, with MRG’s 108-unit Madison @ McLean project and Belz’s 188-unit Union at McLean not moving forward at this time. The projects are a block away from each other and projected rents are around $1.40 per square foot.
“As far as projects that involve a nice sized group of (multifamily) units, there really has not been much done in Midtown, especially with ground-up construction,” said Jay Goff, Downtown Memphis Commission vice president of planning and development. “But there’s always been a lot of renovation over the years of older buildings like small four-plexes and multifamily buildings with ten units."
The DMC awarded the $200 million Crosstown Concourse mixed-use development, which will bring 270 multifamily units to the market, a 20-year tax freeze. And the proposed Belz project at Union and McLean received a 15-year PILOT from the DMC in late 2015. However, the Belz project is now under review by the developer as they try to account for additional costs, possibly involving blight remediation expenses.
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Belz Enterprises has announced plans to demolish the blighted hotel at the corner of McLean and Union avenues to construct luxury apartment units.
“They haven’t submitted anything to us yet, but we do expect changes,” said Goff, who points out that for now the current approval for the original project is still active, but construction has not begun.
Original plans for Belz’s Midtown Market call for a mixed-use project with 188 one- and two-bedroom residential units after the removal of 176,000 square feet of blighted vacant buildings. A retail component would have 10,521 square feet of small shop retail and restaurant space as well as a 30,500-square-foot anchor tenant, likely a gourmet grocery store.
As far as the demand for new construction is concerned, one of the things the DMC looks at in trying to determine if a market can absorb more units is the current occupancy levels, and occupancy rate in Midtown is in the high 90s.
“So that lends us to believe that there is demand for more multifamily units,” said Goff, who thinks an influx of more modern apartment types should lure new residents to the area.
Two hurdles to new mixed-use development in Memphis are low rents and high taxes, according to Goff.
“But those hurdles can be surmounted with certain incentives, value engineering and public/private partnerships,” he said.
Loeb Properties is another developer that has had hopes to develop multifamily units in Midtown, but those plans are simmering on the back burner right now. Loeb has sought to buy the Turner Dairy site near Overton Square for a future mixed-use project.
“While we are always interested in Midtown Memphis development opportunities, we have nothing to report at this time at the Turner Dairy site,” said Ciara Neill, a spokesperson for Loeb Properties. “Per the dairy’s request, we have made numerous offers to purchase the site over the past five years.”
Loeb believes that the proposed major expansion of the dairy’s 24/7 industrial distribution use would be damaging to the surrounding residential and commercial neighborhoods. Loeb is among other business owners pushing back against the dairy's expansion, citing that the dairy's presence detracts from property values and future development possibilities.
“We do feel an environmental assessment on potential increases in air pollution, noise increase, lighting changes, and traffic impact to the neighborhood should be mandatory before any decisions are made," Neill added.
Interestingly, rates for stays at Midtown Airbnb rental properties, which have been very successful in the past few years, are not rising due to the increasing amount of competition in that arena.
“By and large, for people who do Airbnb it’s better than renting your property 24/7 because you can get the same amount of money in maybe 8 to 10 days that you would get renting if you were renting you house the traditional way for 30 days and not have to worry all of that wear and tear or evictions,” explained Goff.
“And people who stay Airbnb typically will take care of the property better somebody that is in the home 24/7.”