Memphis real estate growth should stay slow, reliable
We may not always be recognized for it, but Memphis is a city of growth.
Our growth isn’t flashy like in other cities with luxury condo developments and massive apartment towers, but that’s OK. We shouldn’t aspire to be a boom-and-bust city. Instead, we should continue to be a self-reliant community that invests in itself for smart, sustainable growth. That kind of growth is better for investors and – more importantly – better for our city.
The occupancy rates in our apartments and condos are high but not quite full, which means our developments are driven almost entirely by demand, not speculation. That demand for new projects is only occasional and largely driven by job creation and shifting patterns in where people want to live.
Many companies are creating new jobs in Memphis, which brings more people and more need for properties to serve them. But a large percentage of the new jobs are with companies already based here, not necessarily a result of corporate relocation. That leads to a less dramatic style of growth.
Combined with that job growth, millennials and families are moving in almost opposite directions from each other, building new communities to suit their differing needs. Young people are once again flocking Downtown to build new urban neighborhoods with projects like the Tennessee Brewery, South Junction Apartments, Harbor Island Apartments and the Chisca on Main there to accommodate them.
Meanwhile, young families continue to expand the suburbs, looking for quieter communities like Collierville to lay down roots.
Neither of these groups is setting the real estate world on fire, but they are creating more demand for multifamily properties, which in turn creates demand for more opportunities for retail and office space.
That’s not flashy, but it is a lot safer. If you know where to look and can follow the demand, it’s a style of growth that is steady and more reliable over the course of many years. That stands in stark contrast to the speculative projects of other markets that look to create demand instead of meet it.
The risk there is much higher, which can turn out poorly for investors and communities.
This style is not for every real estate investor. Some like to travel the country investing in cities with rapid growth in order to turn a quick profit. Those developers will be disappointed in Memphis – and that is not a bad thing.
We should stick with patient money, with developers who have experience in Memphis, know our community and know that if they keep investing and giving our citizens what we need, they will be rewarded.
That kind of scenario is win-win. Memphis can continue to be a city of reliable growth, and the commercial real estate market can reap the rewards of smart investment.
At the end of the day, we want to encourage and support outside investment, but we shouldn’t depend on others to invest in Memphis. We should aspire to maintain that streak of self-reliance that runs through our city and successfully invest in ourselves.
Frank Stallworth has worked in commercial real estate in Memphis for 32 years. He is a commercial real estate manager for Pinnacle Financial Partners.