Apartment market returns to health
Nashville Business Journal
Too many apartments and too few renters. That's been the case in Nashville for the past 12-18 months, but not anymore. According to Brennon Fitzpatrick, an investment broker with Greater Nashville Association of Realtors Commercial Investment Division member First Management Services, the building boom is over and absorption rates are at record levels. As a result, apartment managers can finally breathe a sigh of relief. In fact, occupancy levels were at 95 percent at the end of third quarter 1998, up more than 2 percent from year-end 1997, and concessions continue to decline.
"I think we all knew occupancy levels would rebound once the level of new construction tapered off, but we were a little surprised by the high level of absorption," Fitzpatrick said. "Historically, the Nashville market has absorbed between 1,000 and 2,500 units per year in times of economic growth, and as of third quarter 1998, we've seen a record-breaking absorption rate of more than 4,400 units."
Nashville's current apartment building cycle began in 1994. Since then, more than 15,000 new units have been completed or are under way. While new starts have all but stopped, there are about 3,500 units currently under construction.
"If absorption remains strong, the market will have no problem filling these units when they're completed," Fitzpatrick says. How do these numbers affect renters? Fitzpatrick says there's good and bad news.
"The good news for renters is that rental rates remain flat because of the abundance of available apartments," he explains. "The bad news is that most of the deals offering a free month's rent and other concessions are over -- at least for now."
In other market news, sales activity was slow during third quarter of 1998 with only one property transfer. The Player's Club apartments on Edmondson Pike sold in June for $8,050,000 or roughly $31,000 per apartment.
Source: Greater Nashville Association of Realtors Commercial Investment Division member First Management Services.
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