Knoxville’s urban living is on the rise, with more than 1,000 new units coming

Nearly 2,000 housing units are located in downtown Knoxville, and with 16 announced projects set to bring an additional 1,183 units, urban living is growing. But why?

Knoxville’s definition of “home” has changed quite a bit over the past few decades and even more in the past few years. Home is no longer just a secluded, stand-alone structure — a place with a mailbox at the end of a private driveway and a spacious, fenced-in yard.

For many, home is above a boutique or across from a bar in the heart of downtown Knoxville.

Logan Higgins rents an apartment from JFG Flats in the Old City, although he never thought he would be a downtown dweller.

“I went through a phase where I wanted to be a hermit in the woods and live off the land,” he said “I used to think cities were just terrible.”

So what changed? Downtown Knoxville, that’s what.

Downtown has changed completely over the past decade into an exciting, creative community, Higgins said. “For me, it came down to convenience and being close to the action,” he said.

Looking to rent in the current market

A report from the Knoxville-Knox County Metropolitan Planning Commission divides the current downtown housing market into three submarkets — the north, south and central.

Owner-occupied units can be found in each sub-market, but 73 percent of downtown residential units are rentals, according to the MPC.

Andrew Holloway is the leasing manager for Dewhirst Properties, whose properties include JFG Flats and Emporium Lofts. Since joining Dewhirst in 2015, Holloway has seen a substantial increase of people looking to live downtown.

“Knoxville, as a city, has seen low housing supply,” he said. “Ultimately, when that happens, you see people moving to rentals.”

And when it comes to renting downtown, the north sub-market seems to be the popular spot, making up 54 percent of the downtown rental options.

Its 868 rental and owner-occupied units are the most in downtown, ahead of the 610 units found in the central submarket and the 355 found in the south.

One of the largest increases of rental units in recent history happened in 2016, with The Daniel and Marble Alley Lofts bringing 318 units downtown.

But just as downtown residential opportunities have increased over the years, so have rent rates throughout Knoxville as a whole, Holloway said.

Still, living downtown can be dramatically more expensive depending on the type of apartment a person wants.

The average apartment price in downtown Knoxville is just $44 more than the Knox County average of $808. However, the average price of a Knox County studio apartment is $552 compared to $1,029 downtown, according to the MPC.

“Knoxville is on a trend of adding people,” Holloway said. “So, what do you do if you can’t buy a house or if it’s just a competitive, shark-infested market? You rent, right? So, when the housing market is that stout and it’s a seller’s market, rent rates move up.”

But despite downtown Knoxville being a more expensive option, people still are finding reasons to live there, and developers are finding their own reasons to add more units to the mix.

The path to full occupancy

Knoxville’s housing market has tightened considerably over the last several years, driven by both a growing population — drawn by available jobs — and a net drop in housing within city limits, according to a report from online real estate listing

The housing vacancy rate in downtown Knoxville hovers at 3.7 percent, according to a new multifamily market report from real estate research firm Marcus & Millichap.

“Knoxville in particular maintains the lowest vacancy of the Tennessee metros as strong household formation and the growth of the 20- to 34-year-old population persists,” the report says. “All the metro’s sub-markets registered vacancy rates below 4 percent in June as tenants sought quality space. Just a single project will be completed in the metro this year, allowing further vacancy improvement.”

The Tennessee Housing Development Agency found the number of apartments lost in Knoxville between 2010 and 2015 was greater than the growth of single-family housing. Unique among Tennessee’s four large cities, Knoxville’s population grew 3.4 percent while housing stock dropped by 2 percent, the THDA study found.

But compared to similar and larger cities such as Nashville, Knoxville housing prices are still low.

Downtown Knoxville’s long-term renaissance, in motion since the 1982 World’s Fair, has just about reached its peak, according to development experts. Old, long-empty buildings have been renovated, offices are nearly full, and development is moving into South Knoxville, and up the Magnolia and Broadway corridors.

Many of the redone historic buildings have become hotels, but some of those include condominium units and even apartments.

Downtown Knoxville has added almost 66 living units per year since 2000, according to MPC. But that’s not just rental units — it includes condominiums.

The city has put more than $19 million into downtown infrastructure over the past five years, with two-thirds of that in 2018 alone. That has helped spur private investment to the tune of $9.1 million per year, MPC found.

Reasons people embrace urban living

When people come to Holloway looking for a place to live downtown, they almost always have the same reason.

“Walkability,” Holloway said. “The number one reason people (give) is they want to live in an area they don’t have to get in the car to do anything.”

Higgins said walkability was a huge draw for him to move into JFG, but he also mentioned the plethora of unique businesses in downtown Knoxville.

“When (my wife and I) were looking for a place to live, our thoughts were that if we want to live and really experience Knoxville, the most amount of culture is downtown,” he said. “Anything outside of downtown, we could be anywhere else in Tennessee.”

There are coffee shops, restaurants, breweries and bars just outside Higgins’ door. Sure, there might not be a grocery store nearby, but mostly everyone drives to the grocery store, anyway, Higgins said.

Holloway said many people have these same opinions about living downtown, but Higgins has research to back it up. His background is in urban architecture, and he studied the benefits of living in cities while at the University of Tennessee.

There are various individual, ecological, and economical reasons people should live in cities, he said.

“You’re around culture and energy, which is a big problem in the suburbs where people end up being the only person in the house and end up being in a lonely subdivision,” he said. “Ecologically, it’s better we aren’t driving as much or cutting more forests to build more neighborhoods and not using as much land for a single person.”

Infrastructure also is important. Running infrastructure out as a city sprawls is a huge cost for taxpayers when pavement and utilities already exist downtown, he said.

“Economically, shops do better downtown where they can get foot traffic,” he said.

“So that’s why strip malls try to simulate a downtown because that’s the best way to get people moving from store to store. … A thriving downtown reflects a thriving economy.”

But despite these reasons, Higgins eventually plans to move away and into a South Knoxville home. For him, it all comes down to the size of his current apartment and the higher cost of more spacious downtown options as he looks to grow his family.

 So, who exactly is living downtown?

According to Holloway, millennials make up a large chunk of downtown renters.

“(Larger) cities are struggling because cities like Chattanooga, Knoxville — as they develop legitimate vision plans, we are ripe for young people to come land, create family, find community.”

Holloway said older people with expendable income are more likely to buy condos, with the average sale price in 2016 being close to $300,000, according to MPC.

But renting in an urban environment just makes sense for people ages 25-35, said Holloway, a millennial himself.

“I think that it’s not as attractive to me to go have my own space and my own yard that I maintain and keep up,” he said. “We find times for business endeavors and our personal endeavors because we don’t have to maintain a property. We live in it, and it’s more of a community.”

But there are cons for some people. For Higgins, the thought of raising a family in a tiny apartment is not ideal.

”Our apartment was kind of tight for the two of us when we first moved in, and then we started a business and got a dog and we kind of maxed out space for those things,” he said. “We may end up having kids in the next couple years, and at this point, we wouldn’t want to pay for a two-bedroom apartment just yet.”

A two-bedroom apartment in JFG can cost up to $1,800 per month, Holloway said.

In addition to space, there is another concern Holloway almost always hears.

“Parking is a big conversation of every apartment lease, typically,” he said. “It’s not a con, but it’s a challenge and requires adaptation. It requires understanding maybe you don’t walk right out to your vehicle from your front door.”

Holloway said Knoxville has a lot of public parking lots that are often free, including State Street Garage. And adding onto State Street Garage is one of many future plans Holloway believes will continue to support urban living in Knoxville.

Looking ahead at future development

In addition to the State Street Garage expansion, the city has announced plans to replace the Jackson Avenue ramps in the Old City, expand the Pet-Safe Downtown Dog Park and replace Gay Street sidewalks, according to MPC.

Surrounding downtown, streetscape improvements for Broadway, Central, Cumberland, Magnolia, and Sevier Avenue are all in the works.

Holloway envisions urban living expanding in these areas and driving business.

“Developments are going in each direction,” he said. “Businesses can only be supported if people are available to support them. So you kind of have to invite the people into the community before you invite the business into the community.”

And developers are already sending out invitations with announcements of new residential opportunities. Among these projects, rentals will outpace owner-occupied units by more than four times, according to the MPC.

Some of the development will be conversions — the largest of which is the Supreme Court building at 719 Locust St. with an estimated 230 residential units planned, according to the MPC.

But new construction will lead the way among upcoming residential projects, with Marble Alley II, The T at Riverfront, Stockyard Lofts and Regas Square combining for 687 of the estimated 1,183 units coming to downtown.

“We live in this overly connected world that has become very lonely,” Holloway said. “So, finding ways to jump into neighborhoods that are unique and special with people in the same stages of life is important. In my opinion, I think that’s doing a lot to drive urban development in cities of Knoxville’s scale across the country.”

Source: Knoxville News Sentinel, by Ryan Wilusz

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Published August 31, 2018