National real estate investment groups continue to buy into Chattanooga's rental market and bid up the prices paid for local apartments and rental rates charged to renters.
More than $600 million of apartment buildings in Hamilton County were sold in 2021, a record high that is triple the level of activity from four years earlier.
"Apartments are cheaper in Chattanooga than many other markets, even with the increases we have had in rental rates," said Robert Fisher, a commercial real estate agent for Keller Williams Realty who tracks the local market. "Our rents are going up, but they are still below national rent levels, and Chattanooga has been discovered as an attractive market for people to move to and for investors to buy into. What we've seen in the past two or three years is unlike anything we've seen in the past 15 years."
Apartment sales during all of 2021 included the highest valued apartment sale in Chattanooga history and three of the four highest-valued real estate deals of all time in Hamilton County, according to the Hamilton County Register of Deeds.
"There are a lot of sophisticated inventors who have analyzed the Chattanooga market and recognized that we were renting apartments below market value and there was a lot of room for upside movement, both in rents and in property values," said Henry Glascock, a real estate appraiser and auction company owner who has worked in the local real estate industry for the past 48 years. "I can't explain where all of the tenants are coming from, but they are coming here and helping to fill these rental units and push up their value. The Chattanooga market is catching up with other markets in the Southeast."
The 280-unit One Riverside Apartments which opened near the Erlanger hospital main campus last month sold for $84.2 million, or more than $300,000 for each of the units in the downtown complex. The record-high price, both in the overall sale and the average price per unit, valued each apartment above Chattanooga's median home price sale of $280,000 in November, according to the Greater Chattanooga Realtors association.
A real estate business created by Capital Square Acquisitions LLC in Glen Allen, Virginia, bought One Riverside Apartments as its fifth major apartment complex in Hamilton County in 14 months. Collectively, Capital Square has invested more than $200 million to buy and upgrade apartments in Chattanooga since October 2020, including the $59.75 million purchase of Lullwater at Big Ridge apartments in June and the $57.2 million purchase of the Integra Vista apartments in Hixson in May.
"Chattanooga is a gem of a city with the feel of Austin or Nashville before they took off," said Louis Rogers, founder and chief executive officer of Capital Square.
Seth Harris, executive vice president of investments for Capital Square, said the firm identified Chattanooga as a growing market in the Sun Belt with relatively attractive prices compared with more expensive cities like Atlanta and Nashville.
"We've seen occupancy rates remain stable, and that's driven by the migration of people into Chattanooga over the past several years," Harris said. "That only seems to have accelerated during the pandemic, and a lot of those new residents are looking for apartments to rent."
Apartment complexes in Ooltewah, Hixson and downtown sold in the past month collectively for nearly $150 million.
The Village of Apison Pike, a 280-unit apartment complex built in 2015 in Collegedale, was acquired by Olympus Village LLC, created by Olympus Properties, for $59.25 million. Also in December, the Northtowne Village apartments at 1011 Gadd Road sold for just over $30 million to Northtown Village Holdings LLC.
With lower interest rates and a bigger share of the population renting rather than buying or owning homes today compared with the past, rents and property values continue to rise across the nation.
Chattanooga rental rates outpaced the nation during the first year of the pandemic but grew at a slower rate in late 2021 than the U.S. as a whole according to the online real estate firm Zumper.
In the 12 months ended in July, Chattanooga's average rental rate for apartments was up 16%, or more than twice the U.S. average.
"Rent has been rising at an alarming rate all over the country," said Jeff Andrews of Zumper. "It's hard to overstate how dramatic rent growth has been in 2021. Through 11 months of the year, Zumper's National Rent index shows the median one-bedroom rent up 12.1%, while two-bedrooms are up even more at 13.2%. For context, the median one-bedroom rent rose by a mere 0.3% in all of 2019, and it was up just 0.6% in 2020."
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.
Biggest real estate sales of 2021
1. Capital Square 1031, a Glen Allen, Va., real estate investment firm, bought the 280-unit One Riverside Apartments for $84.2 million. 2. Capital Square bought the 250-unit Lullwater at Big Ridge apartments at 6038 Hixson Pike for $59.75 million. 3. Olympus Property, a Fort Worth, Texas-based real estate investment firm, bought the 280-unit Village at Apison Pike for $59.25 million. 4. Capital Square 1031 acquired the 280-unit Integra Vistas in Hixson for $57.2 million. 5. The Dominion Group in Knoxville bought the 269-unit Riverview Grande apartment complex in North Chattanooga for $41.7 million.Source: Hamilton County Register of Deeds