The Scenic City now sports some of the nation’s fastest-growing rents. Of 200 cities tracked between 2007 and 2012, Chattanooga ranks seventh for fastest-rising median rents, with rents increasing 26 percent during the five-year period, according to online finance adviser NerdWallet.
That means that, on the whole, rents in Chattanooga are going up faster than rents in New York City. Rents went up 22 percent in the Big Apple during the same period.
“Chattanooga is attracting companies and attracting workers,” said Divya Raghavan, senior analyst at NerdWallet. “It’s both a good thing and a bad thing. Economic growth is a good thing – but it could be pricing out long-term residents, the people who already live in Chattanooga. Rent is also rising for them, so that could be negative.”
Most Chattanooga apartment complexes are full. The city’s average occupancy rate is about 95 percent, according to Rock Apartment Advisors, a Birmingham, Ala., company that tracks Chattanooga’s apartment market. No apartment properties in Chattanooga are less than 80 percent full, and only five are less than 90 percent full, the firm found.
Justin Uffinger, associate at Rock Apartment Advisors, said Chattanooga’s consistently high occupancy rates coupled with the city’s growing popularity among young workers are what’s driving rents up. The company’s annual survey found that Chattanooga’s average rent jumped by 21 percent between 2008 and 2013, spurred in large part by big employers like Volkswagen and Amazon coming to town.
And Uffinger doesn’t expect the prices to drop anytime soon.
“It’s the people you’re attracting to your market,” he said. “You have all these incubators downtown that are attracting all these young technology companies. Between age 25 and 30, those are your prime young renters, the ones who are willing to pay more to live in the hip and up-and-coming areas.”
Another factor that’s pulling up rents in Chattanooga is all the new apartment complexes going up, he added. As of mid-2013, about 1,500 new rental units were in the pipeline for Chattanooga – either planned or under construction.
Those new units by nature will rent at the highest rates, but the influx of new, high-priced units also can cause prices to rise across the board as the increased competition spurs older complexes to either close down or spruce up, Uffinger said.
Management company Papa Properties owns five downtown apartment buildings, and property manager Jeff Bailey said rents have gone up at all of them. While most of the apartment growth is happening in outlying areas like Ooltewah, he said the company’s rents, which range between $600 and $900 a month, increase about 5 percent every year. Rent at some properties has gone up as much as 15 percent in a year, he estimated.
Downtown nonprofit River City Co. recognizes the divide between demand and feasibility and hopes to start bridging it by converting the historic Ross Hotel on Georgia Avenue into about 20 middle-class apartments. The organization believes Chattanooga needs at least 900 new downtown rental units, and has highlighted 22 buildings downtown that could accommodate apartments.
River City is also shopping for a developer for the empty lot in the 700 block of Market Street, hoping to build a five-story building with as many as 77 units, President and CEO Kim White said.
“Add that, the Main and Market building and the Ross Hotel, and that’s a lot of inventory,” she said, “for a place that hasn’t had any.”