ATLANTA — With affordability becoming a major issue for the multifamily industry nationwide, the Atlanta apartment market compares favorably with several other major metros. It’s one reason the metro area continues to be a magnet for apartment investors, concluded the 2016 Atlanta Apartment Market Outlook.
“Atlanta is a market that investors want to move in and out of, which they like. Atlanta will remain an incredibly active investment market going forward,” said Malcolm McComb, vice chairman of CBRE, during his presentation to the 554 attendees. The breakfast outlook meeting was held on Friday, Feb. 12 at the Cobb Galleria Centre.
In Atlanta, renters are only paying 22 percent of their median household income ($56,000) on rent ($1,043 monthly, or $12,516 annually).
In San Francisco, renters are paying $3,242 monthly on average, or 49 percent of their median household income ($80,000), according to data from Axiometrics. In New York, renters are paying 54 percent of their median household income and in Boston renters are paying 36 percent.
Atlanta is one of the most active transaction markets in the country. The metro area ranked fourth behind only Manhattan, Dallas and Los Angeles in terms of 2015 sales volume, according to Real Capital Analytics. Apartment property and portfolio sales in metro Atlanta totaled $6.3 billion in 2015, compared with $2.5 billion in Orlando, $2.48 billion in Raleigh/Durham, $1.7 billion in Charlotte and $1.3 billion in Nashville.
In CBRE Research’s 2016 Global Investor Intentions Survey, Atlanta moved up three spots to No. 6 as a “best metro for investment.” In the same survey, multifamily displaced industrial as a favored asset class among investors. Looking at both findings, it’s clear Atlanta is in a strong position for increased investment this year.
Jay Denton of Axiometrics discussed Atlanta’s rent growth during the meeting.
Atlanta By the Numbers
During the event, which was a joint production of the Georgia Apartment Association and the Atlanta Apartment Association (AAA), Chris Hall, senior vice president of commercial real estate at Haddow & Co., analyzed Atlanta’s apartment sector by submarket. Not surprisingly, Buckhead and Midtown commanded the highest rents. Midtown’s average rent was $1.82 per square foot, and Buckhead’s average rent was $1.89 per square foot in the third quarter of 2015, according to Haddow & Co.
While these two submarkets boast the highest rents and strong occupancy — 97.9 percent in Midtown and 96.8 percent in Buckhead — Hall expressed concern for the amount of units in the pipeline. Midtown currently has 4,608 units under construction and Buckhead has 3,243, as of third-quarter 2015.
“About 3,000 units will deliver over the next 12 months in Midtown, compared to only 2,292 units since 2012,” said Hall. “Is job growth and the corporate relocations of NCR and WorldPay enough to absorb these units?”
According to Haddow & Co., there was a 50 percent increase in multifamily starts in Atlanta from the third quarter of 2014 to the third quarter of 2015, and it’s unclear to Hall if that’s a positive development.
“Since 2012, Atlanta has added more than 10,000 units and the occupancy rate has stayed strong and we’ve had rent growth. What’s scary is we have 22,000 units in the pipeline,” said Hall. “If they all deliver in the next three or four years, that’s a 70 percent increase to the supply in a three- or four-year period.”
Apartment construction is shifting toward high-rise, especially in the city’s in-town submarkets. High-rise product only makes up 12 percent (3,662 units) of existing inventory, but makes up roughly 35 percent of projects in the pipeline (7,901 units).
In terms of rental rates, Atlanta’s annual effective rent growth in January 2016 was above 6 percent, outpacing San Francisco, Los Angeles, Dallas, Denver, New York and Washington, D.C., according to Axiometrics. Even though that’s below the 8 percent annual effective rent growth recorded in January 2015 — the highest rent growth ever for Atlanta — that’s still a sign of progress, said Jay Denton, senior vice president of Axiometrics.
“It’s hard to have the best year ever every year in a row,” said Denton. Axiometrics expects Atlanta’s annual effective rent growth to slow to 4.5 percent in 2016 and occupancy to settle at 94.1 percent.
The Atlanta Apartment Association is the multifamily housing trade association for the Atlanta metro area. Founded in 1975, AAA is one of the largest local apartment associations in the country and an affiliate of the Georgia Apartment Association and the National Apartment Association. Currently, AAA represents more than 1,450 member companies consisting of 350 companies managing more than 340,000 apartment homes, and more than 1,100 businesses that provide products and services to the industry.
— John Nelson