Hundreds of units are in the works downtown, and demand for apartments in the area is high. But the market will have to become more saturated to drive rent prices down, industry leaders said.
“Everybody and their brother is getting into it, so [the market] will be saturated shortly,” developer John Wise said, comparing the situation to the overbuilt housing market. “It’s like everything. It’s cyclical.”
In about two months, Wise will start work on a $4.5 million mixed-use development on the Southside near Finley Stadium.
It will initially have 64 apartment units along with a brewery and restaurant, he said.
He already owns the Chestnut Street property, which has a building on it already. Wise is going to remodel the existing building and add new construction.
The two-phase project could eventually have 160 apartment units, the Times Free Press reported.
Wise is in the process of getting the property rezoned, and he didn’t want to reveal more information about the restaurant and brewery, each of which will be about 4,000 square feet, he said.
The restaurant will have a rooftop bar that overlooks the stadium, said Wise, who has been interested in the Southside for some time.
“I don’t want to release the name, but it’s local,” he said of the restaurant. “I think being a mixed-use development with a restaurant and brewery in the middle of the complex will make it a nice community-type feel.”
Another apartment complex in the works—Mission on Main—will have 48 apartments as part of a 67,000-square-foot mixed-use development with retail spaces, according to the development’s website.
And developers recently broke ground on Walnut Commons, which is also mixed-use and will have a four-story building with 100 apartments as well commercial space.
Little Miss Mag, an early learning center, is relocating to Walnut Commons, which should be complete in about a year, spokeswoman for Little Miss Mag Jenny Mulqueeney said via email.
“It is a big change in the availability of housing downtown—the fact that it’s apartments and not condos,” she said.
Although more apartments are in the works, downtown living isn’t what everyone would call affordable, Brandi Pearl Thompson, with Keller Williams' downtown location, said.
“There are tons of people who want to live downtown,” she said.
One-bedroom apartments downtown can run between $700 and $900 a month, with two bedrooms typically priced at about $1,200 to $1,400, Thompson estimated.
Some families who have more expendable income are renting apartments on the Southside or North Shore so that their children can go to schools such as Battle Academy or Normal Park, she also said.
“That prices young professionals out of the market,” she said. “How are you going to compete with that? Landlords know they can get those prices. And I’m not [criticizing] the landlords. It’s a broken system.”
Demand for apartments is also high because many people who move to the area want to rent first. And anyone whose home has been foreclosed may also enter the rental pool.
A recent National Apartment Association’s report said that 2012 was the year Americans began to shift to a “more renter-based society.”
And, in Chattanooga, some people are paying two-thirds more in rent that they could be paying for a home mortgage, Thompson said.
Oversaturation will eventually drive prices down, but for now, the rental market is hot, Thompson said.
“Chattanooga is a great market, and that’s what people are realizing,” she said.
Updated @ 1:15 p.m. on 09/25/12 to update Brandi Pearl Thompson's title/company affiliation.