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Demand for Live-Work-Play Fueling Global Interest in Atlanta Multifamily Market

With Atlanta’s economy more robust than ever, demand for multifamily housing remains high, driving rent growth and investor interest throughout the market.

Since the last cycle — when a reliance on construction hit hard — the city has transformed its economy by building up its IT, healthcare and automotive sectors, among others. The results of strong job growth and the diversification of employment are evident market-wide.

In particular, Buckhead and Midtown have seen a substantial increase in multifamily supply over the last three to five years, as spillover activity in East Atlanta and West Midtown will continue.

Bo Moore, ARA Newmark

Bo Moore, ARA Newmark

And the rise of two multibillion-dollar sports stadiums (Mercedes-Benz Stadium and SunTrust Park) in the same year — a first for the city — continues to draw national and international attention to intown and metro submarkets.

Urban Goes Suburban
A seemingly insatiable demand for urban live-work-play settings has inspired developers to replicate the highly-amenitized and high-rent success in the suburbs.

Alpharetta’s Avalon was a game changer, spurring destinations in John’s Creek, Gwinnett County’s Peachtree Corners and the mixed-use boon around SunTrust Park in Cobb County.

So far, development activity has been steady in the northern submarkets, with little activity on Atlanta’s south side.

Global Interest Grows
Believing Atlanta has a longer runway than many other major markets, institutional capital has been pouring into the market and groups that typically invest in other asset types (mainly office and industrial) are moving into multifamily.

National developers like Alliance, AMLI, Trammell Crow, Greystar, Hanover, Worthing and Wood Partners are extremely active here, along with regional and local firms such as South City, Pollack Shores, CF Residential and Brand Properties.

An influx of new buyers from the West Coast, Midwest and New York are creating a competitive environment and driving cap rates down as well.

International interest is also at an all-time high. Some of the most active operators in the region are partnering with groups out of Israel, Canada, the Middle East, Germany and the Pacific Rim region.

Value-Add Gains Value
While an influx of new deliveries has created short-term softness in some of the intown pockets, the majority of submarkets have seen little or no additions to the existing multifamily stock. Northern Atlanta suburbs such as Johns Creek and Alpharetta will continue to see strong fundamentals in the coming years since these municipalities present additional challenges to apartment development by tying approvals to mixed-use development.

Though Atlanta has boomed since the downturn and continues to grow and add jobs, the city may be facing a shortage of “workforce housing.” As a result, demand and investor interest has shifted to value-add assets across most neighborhoods, facilitating extremely low cap rates for Class B and C deals.

Strong Basics Fuel Outlook
While the percentage of rental growth may slow, occupancy should remain high with a steady flow of new leases and renewals. Any softness among intown submarkets should be short lived and of no real concern for the market.

Suburban pockets will continue to perform well as value-add sales keep a torrid pace along with more bridge and mezzanine financing.

Given the diversity of Atlanta’s economy, expanding interest among U.S. and international buyers and solid fundamentals, Atlanta’s multifamily outlook remains strong for the foreseeable future.

— By Bo Moore, Director, ARA Newmark’s Atlanta office. This article originally appeared in the October 2017 issue of Southeast Real Estate Business.

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