Leveraging Crexi PRO has helped us market smarter, connect with qualified buyers and tenants, and close deals more efficiently with strong data and exposure behind every listing. Grateful for the partnership.

The new .25 rate cut offers strong potential for real estate improvements in the Memphis area, primarily through relief on borrowing costs, but it won’t resolve deep-rooted challenges like housing shortages that some politicians are saying Memphis might soon face. Why shortages?

• New Jobs: Google, Nvidia, Elon Musk, Grok, St. Jude’s Hospital, Neural Nexus, SK On, and other world-renowned names. The Digital Delta Initiative along with strong overall fundamentals from Medical, Logistics and other Memphis industry has the potential to create and IS creating thousands of new jobs. 
• Memphis Mayor Paul Young: has emphasized the city’s need for more quality rental units, noting limited new supply and new job growth. 
• Demand Dynamics: Lower interest rates will boost buyer demand, drawing sidelined investors back and supporting real estate prices for modest to strong growth.
• Supply Dynamics: On the supply side, the modest rate decrease is not enough to encourage most developers and builders to ramp up construction. 
• Broader Market Sentiment: Fed chair Jerome Powell warned that “housing is going to be a problem” in the US without policy tools to address supply constraints.
• Roadblocks to Construction: Rising prices of lumber, concrete, and steel along with new labor shortages.
• Market Cycle Investment: Market cycles reward investors who act BEFORE headlines bemoan supply shortages.

Just announced! Houston company plans to turn two blocks of downtown Memphis into a tech hub.

— Steve Woodyard, CCIM

Memphis Multifamily Market Summary 2024-2025

The Memphis multifamily market is at a turning point. After a few years of rising cap rates due to higher interest rates and economic uncertainty, 2025 is shaping up to be the year when things start stabilizing.

Per Lawrence Yun, National Association of Realtors Chief Economist, Memphis will see a spike in rents and values in the next 12 months. 

Per CoStar, Crexi, and public data, Memphis multifamily cap rates hit ~6.8% in 2023, well above the national average, offering investors good investment opportunities. 

Higher borrowing costs forced sellers to adjust pricing, leading to slower transaction volume and more cautious investors and motivated sellers. 

But with interest rates expected to hold or slightly decrease in 2025, we may see slight cap rate compression by year-end and prices increasing. 


Supply & Demand Shifts

A wave of new Class A developments caused higher vacancy in luxury apartments, forcing owners to offer concessions.

Meanwhile, Class B & C properties have remained more stable, with strong occupancy and rent growth.

The Elon Musk new AI facility, Blue Oval City Ford Truck project, St. Jude’s $13 Billion expansion, Regional One Health’s new $1 Billion hospital campus, FedEx hub expansion are expected to bring tens of thousands of new jobs, increasing housing demand.

The Greater Memphis Regional Commerce has been hinting at several new huge projects coming soon but have yet to be announced.  Most are speculating that  more ancillary uses related to Musk’s AI like Dell Computer Company as well as more distribution related opportunities. 


Opportunities for Investors

Memphis is still an affordable, high-yield market compared to national averages but prices may not stay this low for long. 

Investors willing to buy at today’s higher cap rates could see strong returns if rates decline and values rebound.

Distressed asset sales may increase as some owners struggle to refinance at today’s rates creating some shortterm opportunites for cash buyers that move fast without requiring bank financing. 

2025 Outlook

Experts predict cap rates could dip slightly as rates stabilize.

Investors are positioning for a rebound, anticipating strong rental demand and long-term market growth.

Memphis remains one of the best markets for high-yield multifamily investment.

If you’re in the multifamily space, how are you adjusting your strategy for 2025?

Let’s talk about the opportunities ahead!

• Worth Woodyard
  Woodyard Realty Corp.
  901-767-1998
  worth@woodyardrealty.com

Partnering with Give901 and cityCurrent, Woodyard Realty was proud to award scholarships to outstanding students and professionals in Memphis once again this year.

Click below to read Anjessica’s story:

Scholarship application deadline is July 19

Thanks Jeremy C. Park for spreading the good and the good news in Memphis and beyond!

The Memphis area is hot with new projects over the past few years:
10 Amazon locations
St. Jude’s $13 Billion Expansion
BlueOval City

New construction means jobs, more jobs mean growth, growth means new household formation…and that means we rent more apartments!

BlueOval construction time lapse

Not only can it effect the value of your property, but it could affect the amount of loan you can get on the property. 

Quick example:

Let’s say your property brings in $2,534,260 in gross income and your total operating expenses are $1,429,286.  This leaves what the apartment industry calls the Net Operating Income of $723,565.

The Net Operating Income is the number the appraiser uses to value your property when using the income approach to evaluation. 

The appraiser will then apply the appropriate Capitalization Rate to that Net Operating Income to indicate the value of that particular property.

The capitalization rate is a fancy way of saying “the return the investors want to make on their money before debt” for that particular asset. 

So, in the example above the NOI was $723,565 and the rate of return required by investors was 6.5%.

Then the value would be around $11,131,769.

Now lets say the management staff works hard and reduces expenses, improves collections, and the NOI goes up to $958,100. Now your property is worth $14,740,000!

Therefore, small changes can dramatically effect the Value. 

Let us know if your staff would like a one hour or less presentation on this subject to help everyone understand the impact of small changes!

Have questions about YOUR property? Call us!

We’re looking forward to serving you in 2024!

CLICK HERE TO VIEW OUR YEAR IN REVIEW