MARKET SNAPSHOT
Developers remain active in the region, although there are indications that the pace of new development is slowing. As of July 1st, there are 4,701 units under construction across the Panhandle. The Ft. Walton Beach area accounts for the largest portion, with 2,089 units, representing approximately 44% of the total pipeline. Pensacola follows with 1,446 units under construction, and Panama City with 1,166 units. New unit deliveries in the region are expected to slow by mid-2025, as only 600 units have broken ground since the start of the year. This represents a 65% decrease compared to the same period last year.
Developers remain active in the region, although there are indications that the pace of new development is slowing. As of July 1st, there are 4,701 units under construction across the Panhandle. The Ft. Walton Beach area accounts for the largest portion, with 2,089 units, representing approximately 44% of the total pipeline. Pensacola follows with 1,446 units under construction, and Panama City with 1,166 units
Quarterly net absorption in Atlanta has been on the rise since early last year, but an influx of new supply has applied downward pressure on occupancy rates. Currently, Atlanta’s average stabilized occupancy rate stands at 90.4%. For context, the pre-pandemic average stabilized occupancy was 92.7%, indicating that the current deviation from the norm isn’t massive. The current pressure is largely due to newly opened properties that are aggressively leasing up, which affects stabilized high-end properties.
At the submarket level, it’s no surprise that areas with heavy construction pipelines are showing the weakest occupancy rates. Midtown Atlanta, with nearly 9% of the 28,0000 units under construction, has an occupancy rate of just 88.5%. Conversely, outlying Gwinnett County, which has 1,450 units under construction (representing 5% of the construction pipeline), surprisingly witnessed a modest 10 basis point annual increase in its average occupancy rate, bringing it to 93.3% as of June 2024. This suggests that renter preferences in the Atlanta area may be shifting in favor of more affordable but still well-appointed suburban properties.
Multifamily rents in Atlanta are experiencing some of the steepest annual decliners in the United States, echoing trends across other Sun Belt markets. After experiencing negative absorption in 2022, the market rebounded in 2023 and has sustained positive absorption for the past six quarters. However, despite this surge in demand, the continued influx of new rental units has consistently outpaced move-ins, leading to five consecutive quarters of annual rent decreases. Looking ahead to the remainder of the year, if Atlanta maintains the robust absorption pace seen in the first half of the year, modest gains in rents could be on the horizon by year’s end.
Submarket performance varies, with the majority (28 out of 39) experiencing annual contractions in rents. The most severe contraction occurred in the supply-heavy downtown submarket, where rents plummeted by 5.9% over the year ended in June 2024. Furthermore, 20 of the 28 submarkets with negative annual rent growth saw decreases exceeding 2.0%. On a brighter note, rents edged up by 0.6% on a quarterly basis at the broader market level, with 26 of Atlanta’s 39 submarkets also reporting quarterly rental growth.
Atlanta has experienced one of the largest expansions of multifamily inventory in the post-pandemic period, which has significantly challenged operators’ abilities to increase rents. The overall occupancy rate in the Atlanta market is expected to remain below the 10-year average for the next several years as the number of new units delivered tapers off and the buildings lease up. Renter demand is projected to align with new deliveries by late 2024 or early 2025.
Positive year-over-year rent growth is anticipated by early 2025. Despite current challenges, the long-term prospects for Atlanta’s multifamily market remain strong. Atlanta consistently ranks among the top U.S. markets for net domestic migration and population growth, similar to other major Sun Belt metros. Continued household growth and net migration are expected to sustain demand for apartments in the Atlanta area in the long run.
Urban and core-suburban submarkets in Atlanta are particularly attractive due to the region’s rapidly expanding base of highly educated workers, especially those in the growing technology sector. Although layoffs in the technology sector may temper the pace of new hiring this year, the greater Atlanta region’s educational institutions produce over 40,000 college graduates annually, placing it among the top 10 metros nationwide. This influx of talent continues to drive the region’s economic vitality and underpins the long-term viability of its multifamily market.
