Southern States See Growth (JPM)
Southern states see growth in non-residential market
by Janice Rosenberg
Overbuilding and a general economic slowdown are affecting residential property development in five contiguous states: Alabama, Arkansas, Kentucky, Mississippi and Alabama. Fewer new properties are being constructed and those already online are taking longer to lease.�
�According to a local economist, it will take about nine years for what was built in our housing market to be absorbed,� said Beverly Roachell, CPM�, president, RPM Management Co. Inc., AMO�, in Little Rock, Ark. �So there�s not much new development here. The cranes have stopped.��
Despite generous inventory with low absorption, there are still positives within certain sectors of the five-state area. Several IREM Members provide their take on how to work through these challenging economic times.
Excess Inventory
Until five years ago, locally owned properties in Tuscaloosa, Ala., provided enough units to serve year-round residents and the annual fall influx of University of Alabama students. Then university President Robert E. Witt, declared that the student population would grow from 19,000 to 28,000 by 2013, drawing attention from out-of state condominium developers, said Warner Johnson, CPM, director of property management at Duckworth- Morris Real Estate in Tuscaloosa.�
Overbuilding resulted, and last fall Tuscaloosa saw vacancy rates reach as high as 10 to 15 percent, the highest rates in 15 years. In Fayetteville, Ark., home of the University of Arkansas, property managers have seen occupancy rates drop from 98 percent in 2007 to just 85 percent this year, also due to overbuilding, Roachell said.
In Mississippi, residential markets are down due to excess inventory, the inability of people to sell existing homes and tightening credit, said Keith S. Collins, CPM, of Keith S. Collins Co., in Germantown, Tenn., just north of the Mississippi border. Local developers and builders are taking a very defensive posture and have slowed down, waiting for excess inventory to be absorbed.�
Until recently the downtown market in Memphis, Tenn., had been very successful, spurred by second-home buyers, Collins said. Now sales of the mid-rise condos his company manages, which originally sold �like gangbusters,� have slowed to a snail�s pace.�
�Construction permits are off. Listings are up and closings are down, which shows the market is suffering,� he said.�
As a result, Collins� new business growth rate has slowed dramatically this year, in contrast with the company�s first seven years when its inventory grew from 1,800 units to 14,000 units in 120 condominium associations in Tennessee and Mississippi.
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