Knoxville, TN Multifamily Market Report Q2 2026
Knoxville’s multifamily market entered Q2 2026 with demand holding up against an elevated supply backdrop. Population growth, the University of Tennessee, and a diversified employment base continue to support apartment demand, with 763 units absorbed during the quarter. At the same time, recent development has increased competition for renters, contributing to an 8.7% vacancy rate and modest pressure on rents. The market’s longer-term fundamentals remain supported by continued population growth and major employment anchors across education, healthcare, research, and manufacturing.
Highlights
- Strong renter demand continues to support the market, even as a recent wave of new supply keeps operating conditions competitive.
- Elevated development activity is limiting near-term pricing power, though a slowdown in new starts should help the market work through available inventory over time.
- Investment activity persists despite softer fundamentals, with buyers remaining active across a market that offers a broad mix of newer and more affordable properties.
Knoxville Demographics
Source: Oxford Economics
- Unemployment Rate: 3.0%
- Current Population: 972,834
- Households: 403,574
- Median Household Income: $77,833
Knoxville Multifamily Rents, Vacancy, & Construction
Rents
Average asking rents reached $1,509 per unit in Q2, while year-over-year rent growth registered -0.4%. The recent expansion of apartment inventory has reduced landlords’ pricing power, particularly as newly delivered communities compete for tenants. Knoxville nevertheless retains an affordability advantage relative to larger regional markets, which continues to support renter demand. With additional supply still moving through the pipeline, meaningful rent acceleration may remain limited in the near term.
Market Asking Rent Per SF
Source: CoStar Group, Inc.
Vacancy
Vacancy stood at 8.7% in Q2 as the market continued to absorb a significant expansion of its apartment inventory. Demand remains supported by population growth and the University of Tennessee, where a large share of students live off campus, but recent supply additions have kept vacancy above historical norms. The 763 units absorbed during the quarter demonstrate continued renter demand, though additional lease-up will be needed to bring available inventory back into balance.
Vacancy Rate
Source: CoStar Group, Inc.
Construction
Development remains a key factor shaping Knoxville’s multifamily fundamentals. Approximately 2,980 units were under construction in Q2, while 380 units were delivered during the quarter. The pipeline is concentrated largely in newer product, while construction starts have begun to slow as elevated costs and existing supply pressures make additional development more difficult. This moderation should gradually reduce supply pressure once the current pipeline delivers.
SF Under Construction
Source: CoStar Group, Inc.
Knoxville Multifamily Sales
Investment activity totaled $81.8 million during Q2, with properties trading at an average of approximately $187,000 per unit and a 6.2% market cap rate. Transaction activity has continued despite elevated vacancy and limited rent growth, reflecting ongoing investor interest in Knoxville’s long-term demand drivers. The market’s diverse inventory also provides opportunities across a wide range of asset profiles and price points, while higher borrowing costs continue to influence valuations and underwriting.
Sales Volume & Market Sale Price Per Unit
Source: CoStar Group, Inc.
By the Numbers
Q2 2026 | Source: CoStar Group, Inc.
- Sales Volume: $81.8M
- Cap Rate: 6.2%
- Price Per Unit: $187K
- Vacancy Rate: 8.7%
- Rent Growth (YOY): -0.4%
- Asking Rent Per Unit: $1,509
- Units Under Construction: 2,980
- Units Delivered: 380
- Units Absorbed: 763
