REPORT SHOWS DOWNTOWN APARTMENT LEASING A MIXED BAG
Anew report shows a mixed bag over how well some of the array of downtown Chattanooga apartment projects are doing, with a couple less than half leased and two others nearly full.
The Market City Center apartments are only about a third leased after well more than a year on the market. A top official for the owner said that filling up the 125-unit building on the 700 block of Market Street has been a lot slower than anticipated.
“We’re putting new initiatives in place, more marketing. We anticipate things will pick
up this year,” said Gail Battle, a senior vice president for the Atlanta-based The Simpson Organization.
Of the four apartment projects with active tax breaks from local governments through payment-in-lieu-of-tax (PILOT) agreements with the city included in the new report, Market City Center has the worst leasing experience.
Another apartment complex, 1400 Chestnut near Chesnut and West Main streets that opened late last summer, is gradually leasing up its 200 units with fewer than 40 percent filled, the report showed.
However, the two other apartment projects in the report are nearly fully leased.
At The Maclellan Apartments at 721 Broad St., 79 of its 85 units are filled, said leasing consultant Jeremiah Stuart.
“We’re pretty happy with those numbers,” he said. “We’re in a good spot to get those last six or seven units.”
Still, however, the Memphis company behind the Maclellan earlier put on hold building new apartments in the First Tennessee Bank building nearby, with work now expected to restart late this year.
At the Walk 2 Campus UTC 5 apartment complex at 500 Lindsay St., just two units are unleased, according to the report.
The city last month issued its Affordable Housing PILOT Annual Report to the Chattanooga Health, Educational and Housing Facility Board.
The report doesn’t look at all of the flurry of the new apartment buildings having gone up over the past few years. It only examines occupancy levels for a handful of projects having received the property tax breaks with the city since new PILOT rules were crafted about two years ago.
Kim White, who heads the downtown nonprofit redevelopment group River City Co., said a lot of the units opened about the same time and it’s a matter of the market absorbing the apartments.
“What we’re excited about is that there are options,” she said, adding that some apartment projects, including those in the report with PILOTs,
“What we’re excited about is that there are options. There are housing options below the medium income, which is a good thing.” KIM WHITE
offer so-called “affordable” units. Those units are priced lower than typical apartments and aimed at people who make less than 80 percent of the area median income, or about $34,000 a year in Hamilton County.
“There are housing options below the medium income, which is a good thing,” White said.
At the 1400 Chestnut apartments, the housing report showed that 31 of the 40 PILOT-assisted or “affordable” units already are leased up.
Brian Minshew of 1400 Chestnut said the price point, $864 a month for the one-bedroom units, is good for that area of the city.
He said that “to some degree” the units at the apartment complex are getting leased. Minshew said 1400 Chestnut is offering incentives to renters, such as one month free for a 12-month lease and it’s also reducing rates to generate interest.
John Healy, a Chattanooga developer and commercial real estate broker, said that while a lot of apartments came on the market at about the same time, he expects they’ll eventually lease up.
But what’s needed, he said, is for Chattanooga economic developers to do a better job of recruiting companies to locate downtown.
“But that’s where the rubber hits the road,” Healy said. “We’ve got to do a better job recruiting companies to come here.”
He said there hasn’t been enough focus on corporate recruitment, adding that Chattanooga has lower costs for housing and other advantages over cities such as Nashville and Atlanta.
White said she’s enthused about the job growth focus by the Chattanooga Chamber of Commerce, which is the main economic development entity in Hamilton County, in its Velocity 2040 visioning effort.
“We need these buildings filled,” she said. “I’d love to see new office buildings downtown.”
Concerning the Market City Center apartment complex, she said the owners are working on a new marketing plan. She said the units came online in the winter months, which is typically a slower leasing season, and they were the highest priced in the market.
“Now they’re in line with the market,” she said. “It’s a great location and it has parking.”
But even with several hundred apartment vacancies in and around downtown, more housing units, mostly apartments, are still coming online.
The Bluebird Row apartments, with 283 units behind the Chattanooga Choo Choo, started leasing not long ago.
Jessica Graham of Bluebird, which did not seek a PILOT and is not included in the city report, said about 132 are leased up to date even though some units still aren’t finished at the site.
“We’re happy with those numbers so far,” she said. “I don’t think we’ll have an issue.”
Rents there range from $1,300 for one bedroom to $2,100 for three bedrooms.
Also on Chattanooga’s Southside, near the Pilgrim’s Pride chicken processing plant, Knoxville developer John Murphy is building 139 apartments along with a 200-space parking garage. That development is expected to open later this year.
In addition, off Riverfront Parkway, work has started on another apartment complex by Nashville-based Evergreen Real Estate that will provide 200 more units. Apartments and other housing units in that development, called Cameron Harbor, have had solid leasing and ownership rates.
Meanwhile, a Charleston, S.C., developer has plans for 151 apartments and a dozen townhouses on former Unum Group parking lots off Fourth Street downtown. The project is one of the riverfront area’s biggest-ever apartment and commercial developments.
White said that development will draw from major employers such as Unum and Erlanger and Memorial hospitals.
“Every district [downtown] has additional housing options,” she said.
White said plans are to conduct a market study toward the end of this year. Also, another tour of downtown living effort to show off properties is expected to be held in the spring, she said.
White said developers are still interested in building housing downtown.
“That pipeline is not empty,” she said.
Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.