Atlanta Metro in Growth Mode
MFE-ChristineSerlin-9.12.22 — The Atlanta rental market is expected to remain strong due to a healthy economy, a lower cost of living, good demographic trends, and positive rent growth, according to a midyear multifamily report for the metro from Berkadia.
Multifamily starts have increased since the beginning of the pandemic due to recent strong demand. More than 26,000 units have been added since the beginning of 2020, with delivery of 4,500 units in the first half of this year. In all, 11,752 units are expected to be delivered in 2022, with another 20,385 deliveries projected for 2023. According to Berkadia, leasing activity hasn’t kept pace with the deliveries in the first half of the year, with the market seeing a drop in occupancy. However, the current occupancy rate of 95.7% is higher than the pre-pandemic average of 94.5% in 2019’s fourth quarter.
While Berkadia predicts that occupancy will decrease in the second half of the year as more units are delivered, it says this is not expected to deter operators from continuing to raise rents because of the strong fundamentals. Effective rents were up 3.9% to $1,662 year to date in the second quarter, or 17.5% year over year.
“There is a pipeline of oncoming supply that will stabilize the rent growth we’ve been seeing, but that does not seem to be significantly outpacing the population growth of the metro,” says Frank Roessler, founder and CEO of Ashcroft Capital, which owns nearly 3,500 multifamily units in the metro.
The Atlanta metro area boasts strong population growth and employment drivers. According to 2021-22 population estimates from the Atlanta Regional Commission, the 11-county metro area added nearly 65,000 people within the past year, pushing the region’s total count to 5.1 million.
“Atlanta is the pure definition of a growth market versus a barrier market like Boston, Seattle, or San Francisco. Recently, there has been a steady in-migration to Atlanta from other cities,” says Patrick Chesser, senior managing director of development in the Atlanta office of Mill Creek Residential, which has developed over 3,300 homes in the metro. “It’s less expensive and more convenient for companies to do business here without compromising the quality of workers. The jobs and demand for housing follows, which add to the supply imbalance Atlanta already has due in large part to the scarcity of development activity from 2008 to 2012.”
According to Berkadia’s midyear report, year-to-date sales volume was at $3.6 billion for the metro, with 47 transactions and an average cap rate of 3.7%.
“Nationwide, multifamily trades have slowed to a trickle. However, we are seeing quality deals get done in the right markets. And Atlanta’s population growth and exploding economy have provided investors with the confidence to continue to invest. Currently, we have about 25 properties in our investment pipeline, and several are in Atlanta,” adds Roessler.
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