Though Atlanta has had a reputation as a boom-or-bust town for many years, it has struggled to maintain a thriving multifamily development business. However, an in-depth look at the current local trends shows a strengthening multifamily market, and with it, an evolution of many lower-cost neighborhoods into desirable development and residential sites. Now, the city is poised for a more sustainable future as demand for apartment housing inside the Perimeter continues to increase.
Classic institutional developers are seeking to use this increasing demand as a platform to boost Atlanta to a new strata in line with New York, Boston and other metropolises such as Houston and Dallas. With no significant barriers to entry, active merchant buyers are taking advantage of Atlanta’s large developable land supply to support new high-density multifamily developments. Developers are working to stabilize the supply in response to the overwhelming demand; three- to five-year waves of building and development will help grow the market steadily.
Amid the current five to 10 percent growth rate, some in-town projects are predicted to trade at higher levels than ever before. For example, 77 12th Street is widely expected to trade for more than $300,000 per unit — a robust figure considering few in-town multifamily units have sold for more than $200,000 apiece. Additionally, SkyHouse Midtown, located at 1080 W. Peachtree St., and other developments like it, have performed exceptionally well since opening in early 2013. That success has spurred additional high-rise buildings in Buckhead and Midtown, two of the city’s more affluent neighborhoods.
As recently as a decade ago, an upper-tier apartment segment in this area did not exist. In the past, anyone weighing rent prices intown at or near $1.80 per square foot against a mortgage payment would almost exclusively opt for the latter. Now, an urban resurgence has made many Atlantans into renters by choice. They have higher expectations for amenities and are willing to pay up to 40 percent more to get them in Buckhead and Midtown. These luxury developments have the added bonus of proximity to Class A office space. But most importantly, residents are willing to pay for the cachet.
In addition to Midtown, other developments inside the Perimeter offer many of the same amenities at a more affordable price. While few Milennials can manage to pay for luxury tier apartments in upscale Atlanta locales, they still want to live a social lifestyle around Atlanta’s many attractions, including the Alliance Theater, Piedmont Park and the High Museum of Art. Decatur also offers a vibrant cultural scene, and developments in the Old Fourth Ward, Cabbagetown and West Midtown neighborhoods are working to become walkable neighborhoods in the heart of the city.
The Place on Ponce, which is currently under construction and scheduled to be delivered in the spring of 2015, will become the first apartment community in Decatur to open its doors in more than a decade. The development underscores the change in the nature of the multifamily product, with amenity areas for residents including a clubhouse, fitness center, resort-style pool and outdoor courtyards, access to 10,000 square feet of retail space and the nearby Decatur MARTA station. Although Atlanta is notorious for its traffic and sprawl, younger generations see in-town apartments as a step toward contributing to sustainability and decreasing their footprint.
Multifamily developments like these are especially attractive to a generation that is more mobile in their jobs than ever before. With less emphasis on tenure, there is decreasing certainty among recent college graduates that they will remain in their positions long-term. Still, the desire for a high-quality, cost-effective living space remains, with added emphasis on the quality upgrades new homeowners often seek. Even the 30-plus demographic without families is showing a strong preference to remain in-town, reflecting the overall national trend of singles marrying later in life.
In recent years, Atlanta has become a unique blend of recent college graduates, Gen X and Gen Y, whose demand for high-quality multifamily housing is outstripping the city’s supply. Its increase in multifamily developments since the Great Recession has happened even without a huge uptick in net job growth. As unemployment numbers continue to fall and local housing demand levels out to a more sustainable two to three percent, expect developers and homebuyers to make the in-town multifamily segment a focal point of Atlanta’s growth.
— By Conor McNally, chief development officer for Carter. This article originally appeared in the May 2014 issue of Southeast Real Estate Business.