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The Memphis multifamily market has slowed a bit, but opportunity beckons on the horizon as the market corrects, according to Mark Fogelman, president of Memphis-based Fogelman Properties.
The company, now in its 60th year of operation, spent between $200 million to $300 million annually on acquiring assets between 2018 and 2022. With higher interest rates and recession fears, that changed in 2023.
“We have not closed on a property this year,” Fogelman said. “We’ve been on the sidelines, not for a lack of trying. We’re looking closely at probably a dozen deals a month, but they don’t pencil out right now.”
It’s been a yearlong story. Sales and activity in commercial real estate have been down across all sectors year to date. The most recent local multifamily market report from CBRE, which covered Q2 2023, had marketwide occupancy at 92% and marketwide sales at only $96.5 million.
“Things are getting closer to making sense because pricing-wise, we are seeing a fall in asset prices right now,” Fogelman said. “They are becoming more attractive again.”
For now, Fogelman Properties is holding. The company ended last year with some high-level hires, and Fogelman said the company has spent most of the year keying in on its own properties.
“When things are slow, you want to make sure your attention is high, and you’re doing everything you can,” he said. “There are always things you can improve on.”
For Fogelman Properties, that inner focus was mostly on technology and customer service. He said that much of this year’s emphasis has been on meeting customers where they are, especially a younger demographic. They prefer things digitally, rather than having to cut a check or make a call.
“When the transaction world is slow, you really get into asset management and property management and try to do better,” Fogelman said.
Still, despite a slower period, Fogelman said that he is “impressed” by the amount of planning activity for local multifamily construction. While 2023 has been slow on starts and deliveries, he anticipates seeing a flurry of building activity as those plans deliver in 24 to 36 months.
He did say that developers that are able to deliver their projects in that time frame could be opening in very favorable conditions.
“When those new projects are completed, they will be entering a period of little competition,” he said. “If you can manage to get a project off the ground right now, you’re going to be leasing up your project or delivering your new retail or new office in a very favorable environment in two or three years. But you’ll have to stomach higher interest rates right now.”