Exploring the Vacancy Rates in Downtown Memphis: What Do They Mean for the Future?
Welcome to Memphis, a vibrant city renowned for its rich history and dynamic culture. As we navigate through 2024, there’s been a lot of chatter about the state of real estate, particularly regarding vacancy rates in Downtown Memphis. Let’s dig into what these numbers reveal about our urban landscape and what they could mean for residents, businesses, and investors alike.
A Closer Look at Vacancy Rates
According to data from CoStar, a leader in commercial real estate analytics, Downtown Memphis is facing higher office vacancy rates compared to the wider Memphis area. Currently, the office vacancy rate sits around 14% Downtown, which is about 3.7% higher than the city’s overall rate. This raises questions about what’s contributing to this disparity and how it affects the local economy.
Diving Deeper into Multifamily Properties
When we shift our focus to multifamily properties, the picture becomes even more complex. In the second quarter of this year, about 11% of multifamily properties Downtown were vacant. It’s worth noting that these rates can be quite volatile, showing a fluctuation driven by various economic factors, including the impacts of the Covid-19 pandemic.
After the pandemic, vacancy rates for multifamily properties dipped to a low of 4.4% in Q3 2021, but they have since rebounded to levels higher than pre-pandemic figures. Specifically, the current multifamily vacancy rate Downtown has increased by nearly 5% since Q1 2020, which recorded a vacancy rate of 6%. This could suggest an ongoing trend that was already in motion long before the pandemic disrupted everything.
Shifting Patterns and the Future
Interestingly, while the long-term outlook for multifamily vacancy rates in Downtown suggests a negative trend, we might just be on the brink of something new and optimistic. Since the fourth quarter of 2023, there’s been an average drop of 1.3% in vacancy rates for Downtown apartments. Although it’s too early to determine if this is a lasting trend, signs of stabilization are appearing after a tumultuous couple of years.
What About Quality?
A fascinating aspect of this analysis by Nick Leverett, the director of market analytics at CoStar, highlights that the distribution of multifamily properties in Downtown Memphis is quite unique. Typically, vacancy rates for high-end apartments soar higher than those of lower-end units nationally. However, Downtown Memphis flips this trend on its head, revealing a potential surplus of lower-quality units while higher-end apartments remain scarce. As Leverett suggests, this discrepancy likely stems from an “underbuilding” of quality units in recent years.
Office Space: Stalwarts in Uncertain Times
Turning our attention back to office spaces, Memphis is showing resiliency despite the national trend of rising vacancies. Unlike many areas where businesses are moving away from office spaces, Memphis is seeing the opposite—an influx of companies moving into Downtown. This is an encouraging sign for businesses and property owners alike.
Interestingly, the office vacancy rates have maintained a level of stability since 2014, fluctuating within just three percentage points. Even through the challenges posed by the pandemic, the vacancy rate Downtown in the second quarter of this year reflects a similar rate to that of early 2020. This stability suggests that while some cities are struggling to fill office space, Memphis is managing to hold its ground.
Anticipating Change: Future Developments
Looking ahead, development plans that have been in the works, like the long-awaited renovations of the 100 N. Main and the Sterick Building, promise to reshape the landscape. These two projects stand poised to revitalize areas that have been vacant for years, although the expected completion dates are still a long way off.
As we keep our eyes on the changing dynamics within Downtown Memphis, it’s clear that both challenges and opportunities lie ahead. Residents and investors alike will be watching closely to see how these vacancy rates evolve in the coming months.
Stay tuned, Memphis! The real estate landscape is about to get interesting.
