$1,601 2Q 2024
-2.7%
90.6% 2Q 2024
-50 BASIS POINTS
6,265 [YTD: 10,143]
7,262 [YTD: 12,296]
Net absorption surged in the Atlanta multifamily market in 2Q 2024, as the renters absorbed 6,265 units, making it the third highest quarter for net absorption in the past decade.
Despite strong absorption, occupancy rates in high-end properties continue to decline due to an ongoing influx of new unit deliveries. Atlanta’s apartment construction pipeline is near record levels, with developers currently building 28,000 units, which represents 5.4% of Atlanta’s existing market-rate inventory.
Multifamily rents in Atlanta are experiencing some of the steepest annual decliners in the United States, echoing trends across other Sun Belt markets. However, rents edged up by 0.6% on a quarterly basis.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
Rental demand in the Atlanta multifamily market surged in 2Q 2024, yet owners and operators are still grappling with the challenges of depressed occupancies and declining rents following a record influx of new supply. In the second quarter of 2024, the renters absorbed 6,265 units, making it the third highest quarter for net absorption in the past decade, surpassed only by Q3 2024 and the record-setting Q3 2021, when 8,081 units were absorbed. Gwinnett County led all submarkets this quarter with just over 1,000 units absorbed. Moreover, all but one of Atlanta’s 38 other submarkets posted positive absorption for the quarter, showcasing broad-based demand across the region.
Despite strengthening positive absorption, occupancy rates in high-end properties continue to decline due to a relentless wave of new unit deliveries. Atlanta’s apartment construction pipeline remains at near-record levels, with developers currently working on 28,000 units, representing 5.4% of Atlanta’s existing market-rate inventory. For context, between 2014 and 2019, the number of units under construction in any given quarter averaged about 15,600, with a peak in the fourth quarter of 2018 when roughly 20,000 units were in the pipeline. However, there are signs that the frenetic pace of apartment construction is starting to slow. Over the past 12 months, the number of multifamily units that have broken ground in Atlanta has decreased by about 45% from its peak in the fourth quarter of 2022.
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.
Average Monthly Mortgage Payment
Average Monthly Rent
At the midpoint of 2024, the total value of individual conventional multifamily transactions in Atlanta reached approximately $871 million, marking a 35% decline compared to the same period in 2023. Additionally, the number of deals executed decreased from 41 in the first half of 2023 to 23 during the same period in 2024. Institutional investors have traditionally played a significant role in the Atlanta multifamily market. This year, although they remain active, their share of the buyer pool has been subdued compared to previous years. It’s well-known that institutional capital has been cautious over the past two years, often remaining on the sidelines. Nevertheless, recent significant acquisitions by KKR and Blackstone in the second quarter of 2024 indicate a potential revival in transaction activity. These firms have substantial reserves ready for investment, which aligns with easing supply pressures across many metropolitan areas that previously hampered rent growth.
While it’s too early to announce a full resurgence of institutional capital, the uptick in investment activity by these buyers at the national level is a promising sign. The core fundamentals positioning multifamily as a preferred asset class in commercial real estate are still robust. Despite a temporary increase in supply, the multifamily market is experiencing a cyclical rather than a secular shift, reflecting its ongoing dynamics within the broader economic cycle.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
|
Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
0.8%
|
-1.6%
|
-0.8%
|
0.3%
|
1.0%
|
0.2%
|
0.0%
|
The 65-74 age group is the fastest expanding renter demographic in the Atlanta metro, showing a 1.0 percentage point growth since the pandemic. This increase suggests a rising demand for senior-focused rental communities that perhaps offer on-site maintenance, housekeeping, or even social activities.
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.
