Atlanta’s Strong Multifamily Fundamentals Give Ballast In A Choppy Market

2021 was a year of strong recovery for the U.S. multifamily market. Multifamily occupancy grew by 90 basis points while rent rates spiked nearly 16% by the end of 2021.

As a result, multifamily owners may be concerned they missed out on a major payday if they didn’t sell last year.

The Atlanta multifamily market, in particular, saw considerable growth in Q3 2021, but this trend started to waver with a modest gain in Q4 at a median sales price of $170K per unit.

The good news for Atlanta multifamily owners is the trends experts are seeing now suggest the 2022 market may be even stronger than in Q4 2021 thanks to the city’s growing labor force, which has led to decreased vacancy and unemployment rates, and increased rent growth throughout the metro area.

A report on Atlanta’s multifamily market found its economy has rebounded faster from the pandemic than national averages, showing gains in its multifamily sector in particular. Rents also rose 14.7% this year.

While Atlanta’s workforce continues to grow along with occupancy rates, many owners are still searching for clarity into what’s happening with today’s multifamily market.

“Apartment fundamentals remain strong and will help owners navigate through a choppy multifamily lending environment,” said Jake Reid, managing director of multifamily investment firm Capstone Cos. “Both effective rents and occupancies continue to rise throughout metro Atlanta, and I expect to see the debt market stabilize in early 2023.”

Reid laid out some key points regarding the current state of the Atlanta market and why, far from missing out on 2021 sales opportunities, Atlanta multifamily owners may be in for an even brighter future.

Steady Employment Outlook

Atlanta is the third-highest growth city in the country, partly due to massive net migration from other states. Over the years, several large corporations have announced expansions, resulting in thousands of high-paying office jobs being added to the Atlanta area. Microsoft, Google, FanDuel, Visa, Cisco, Micron and Norfolk Southern are opening major offices in Midtown, and TK Elevator moved its North American headquarters to The Battery in the Cumberland/Galleria area.

These moves follow a number of Fortune 500 firms setting up technology-related operations locally, including BlackRock, Meta, Anthem and Honeywell.

In addition to the explosive increase in white-collar jobs, the multifamily market is further impacted by the industrial sector that employs blue-collar workers who are often renters by necessity, Reid said.

Such renters often rely on workforce housing communities to provide affordable housing options, which are in short supply. The Atlanta metro is seeing a growing base of blue-collar jobs, with companies like HelloFresh, Amazon and Home Depot adding thousands of employment opportunities to the area at their distribution facilities. Due to the increasing demand for affordable housing, many renters opt to relocate to the suburbs in search of a lower cost of living, increasing occupancy rates in the city’s smaller submarkets.

Apartment Outlook

While Atlanta continues attracting new companies and residents alike, this economic boom may not last forever. There are a lot of uncertainties in the current U.S. economy as the Fed continues to raise interest rates in an effort to curb record-high inflation.

This is one of the reasons Reid believes apartment owners will benefit by seeing a “stickier renter.”

“As interest rates continue to rise and home purchase becomes less and less affordable for many Americans, apartment demand will continue to increase. Renters will stay in apartments longer and rents will push higher,” Reid said.

Chad DeFoor, managing director at Capstone, added that now is the time for Atlanta multifamily owners to stay strong and stick to what they do best: focusing on the fundamentals.

“As metro Atlanta apartment demand increases due to population and job growth, apartment owners will continue to create value at their properties through the tried-and-true method of focusing on the basics: pushing rents and closely watching the expenses,” DeFoor said.

This article was produced in collaboration between Studio B and Capstone Cos. Bisnow news staff was not involved in the production of this content.

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