H1 2025 Chattanooga Multifamily Market Report

Chattanooga has experienced remarkable growth in recent years, fueled by major employer expansions, infrastructure investment, and its emergence as a strategic hub for logistics and manufacturing in the Southeast. The Chattanooga MSA boasts a GDP of over $34 billion, having grown by 12.3% from 2019 to 2023. The combined statistical area is home to more than 1 million people within an hour’s drive, including over 266,000 millennials aged 25 and older, reflecting strong long-term demographic potential. The daytime population exceeds 95,000, while the University of Tennessee at Chattanooga adds more than 11,000 students to the city’s active downtown base. Chattanooga also attracts 15.3 million tourists each year, and local amenities such as the Tennessee Riverwalk, which draws over 150,000 users annually, reinforce the city’s unique blend of livability, recreational access, and regional appeal.

 

Accolades

• U.S. News and World Report named Chattanooga the “Best Place to Live in Tennessee,” ranking #1 in the state and #27 overall in the country.
• In 2025, Chattanooga ranked #46 nationwide for economic performance in the Milken Institute’s Best Performing Cities report.
• Southern Living ranked Chattanooga #8 on “The South’s Best Cities 2025.”

 

Key Findings

• In 2024, Chattanooga reached a major development peak, with a record 2,695 apartment completions.
• As of Q2 2025, only 123 units were under construction, marking a historic low for the past decade, with an expected 90% drop in new construction anticipated throughout 2025.
• While net absorption reached 1,087 units over the past 12 months, slightly above the 2024 figure of 1,006 units, demand continues to lag behind supply, furthering an imbalanced market.
• Rent growth is down -2.1% year-over-year, and occupancy has dropped to 89%. Concessions are averaging two months free, with signs of pressure extending from Class A into Class B.

 

By the Numbers

Q2 2025 | Source: CoStar Group Inc. | Represents Change from Q1 2025

 

• Vacancy Rate: 11.0%
• Rent Growth: -2.1%
• Market Asking Rent Per Unit: $1,389
• Units Under Construction: 576
• Units Absorbed: 442
• Units Delivered: 115
• Cap Rate: 6.0%
• Sales Volume: $61.4M
• Average Sales Price Per Unit: $161K

 

Chattanooga Demographics

• Unemployment Rate: 2.7%
• Current Population: 589,959
• Households: 239,250
• Median Household Income: $72,579

 

Economic Development

The Bend broke ground on its North Phase in April 2024. The project is a 120-acre mixed-use redevelopment featuring over 300,000 square feet of retail and entertainment space, more than 700,000 square feet of office space, over 1,000 residential units, more than 250 hotel rooms, and 300 marina slips. The total project cost is estimated at approximately $28 million. The Bend is expected to significantly enhance riverfront activation, attract new employers, and contribute to the ongoing revitalization of downtown Chattanooga.

 

The South Broad District, a transformative 128-acre mixed-use development anchored by the new Chattanooga Lookouts Stadium, broke ground in July. Phase one of the project is projected to attract over $300 million in investment. With a conservative estimate, the total long-term economic impact is expected to exceed $2.3 billion. The district aims to create a dynamic live-work-play environment, catalyze private investment, and serve as a southern gateway to downtown Chattanooga.

 

According to the Chattanooga Area Chamber of Commerce, the Chattanooga region announced 57 major projects between 2020 and 2024, resulting in a total of 4,850 new jobs. These initiatives represent a combined capital investment of approximately $2.36 billion, underscoring the area’s strong economic growth and appeal to both new and expanding businesses.

 

Chattanooga’s recent economic activity reflects steady employment growth. The metro area recorded 296,100 total jobs in 2024, with only a slight increase to 296,400 in 2025, according to the U.S. Bureau of Labor Statistics. Even with just a slight increase, the upward trend signals continuous, steady momentum amidst a period of recalibration.

 

Since 2008, the Chattanooga region has benefited from over $14 billion in new business investment, successfully attracting major employers, including Volkswagen, Amazon, and Google. At the same time, the area has maintained a strong base of homegrown companies, including Unum, Maples Industries, BlueCross BlueShield of Tennessee, McKee Foods, CBL Properties, Shaw Industries, and Lodge Manufacturing—creating a healthy mix of global and local economic drivers.

 

Population Growth- Hamilton County

According to the 2024 U.S. Census Bureau, the total population of Greater Chattanooga is 1,114,499.

 

Chattanooga Unemployment Rate Comparison

As of May 2025, the unemployment rate is 2.7%, which is significantly lower than the national average of 4.2% and ranks among the lowest in Tennessee.

 

Monthly Job Growth Apr.

Construction

Following a seven-year construction surge, Chattanooga’s multifamily market is now taking a strategic step back. As supply began to far outpace demand, vacancy rates rose to a historic high of 12% in 2024, with only a modest improvement to 11% in 2025. Despite continued renter demand exceeding long-term averages, the volume of recent deliveries created short-term oversaturation, disrupting market equilibrium.

 

To stabilize fundamentals, developers dramatically scaled back construction, giving the market breathing room to absorb existing inventory. This pause is expected to enable renewal cycles for second-generation leases in properties delivered during 2024 and 2025, creating conditions for normalized rent growth to return by 2026–2027. With flat to negative rent growth projected through 2025, this year represents a transitional period—one where the market realigns supply and demand after years of accelerated expansion.

 

The construction pipeline is rapidly thinning, with just 576 units underway, representing a 70.8% year-over-year decline. The slowdown reflects a strategic pullback as the market absorbs recent oversupply, with pressures now extending into Class B assets across select submarkets As absorption remains strong and supply pressure taper, we have a very positive outlook when looking ahead into the latter parts of 2026 and 2027.

 

Construction Starts

Source: CoStar Group Inc.

 

Deliveries and Demolitions

Investment Sales Analytics

Past 12-months | Source: CoStar Group Inc.

• Sale Price Per Unit: $68,506
• Average Sale Price: $9.9M
• Sales Volume: $29.8M
• Sold Units: 591

 

Chattanooga Market 2024 vs. 2025 Comparison

 

Year-Over-Year Comparison

Chattanooga’s multifamily transactions dropped from 18 in 2024 to just 5 in 2025, reflecting broader market uncertainty. Despite the slowdown, Q2 2025 showed strong deal activity, hinting at possible market stabilization. Sales volume fell from $183.6 million in 2024 to $29.8 million in 2025; Q1 figures weren’t disclosed. Units sold declined from 1,312 in 2024 to 612 in 2025, indicating reduced investor activity. Average units per deal rose from 73 to 122, reflecting a shift toward larger, higher-efficiency transactions. This increase was partly due to the sale of a large complex in early Q2 2025. Median price per unit dropped from $108,333 to $71,667, showing market recalibration and changing investor expectations. Investors are now pursuing more basis-driven, selective opportunities with stronger long-term fundamentals.

Key Takeaways

Since interest rate hikes began in March 2022, borrowing costs have stayed high, expanding cap rates and tightening market liquidity. Operating expenses—especially insurance, taxes, and payroll—have continued rising, while rent growth and occupancy have declined amid a wave of new supply. This imbalance has increased expense loads, reduced net operating income (NOI), and further pushed down asset values on a cap rate basis. Lenders have largely avoided forcing sales or foreclosures, instead using a common strategy known as “extend and pretend.” In today’s cautious climate, successful deals typically involve newer assets, positive leverage, or favorable pricing to limit risk—especially on value-add projects.

Concluding Statement

Chattanooga’s multifamily market is navigating a critical period of adjustment as it works toward equilibrium in 2025.A record 2,695 units delivered in 2024 is now pressuring rents and occupancy, especially in Class B submarkets. Rent growth is negative at -2.22%, occupancy has fallen to 89%, and concessions average two months—signs of oversupply. Construction starts have dropped 90%, with only 691 units underway, marking a major slowdown from previous development levels.

 

The broader macroeconomic environment has also added complexity. In early 2025, 10-Year Treasury yields stayed volatile due to tariffs, geopolitical tensions, and broader economic uncertainty. These factors strained debt markets and made underwriting more difficult for many prospective investors. As a result, investors now focus on stabilized, income-producing assets with strong fundamentals and favorable entry points. Ground-up and heavy value-add projects are mostly paused due to high construction costs and limited access to capital. Despite challenges, Chattanooga remains strong with over $2.3 billion invested, growing jobs and population, and just 2.7% unemployment—well below the national average.

 

Looking ahead to the second half of 2025, signs point toward a potential market rebound. With new deliveries expected to decline significantly compared to the past two to three years, positive rent growth and stronger absorption are anticipated. As tariff-related uncertainty fades and the debt market stabilizes, investors should gain greater confidence in underwriting and future projections. Importantly, Chattanooga’s underlying market fundamentals—economic expansion, population growth, and job creation—remain strong, reinforcing investor confidence and fueling optimism around future acquisition opportunities in the region.