MARKET SNAPSHOT
$1,200 2Q 2024
90.5% 2Q 2024
6,754 [YTD: 14,213]
$1,200 2Q 2024
-50 BASIS POINTS
7,652 [YTD: 12,975]
In the second quarter of 2024, heightened rental activity in Jacksonville led to robust net absorption, with renters absorbing 2,298 units, outstripping new unit deliveries over the same period.
The recent slowdown in construction starts is expected to aid a gradual recovery in rental rates, setting the stage for potentially accelerated rental growth of between 2% and 3% in 2025.
The Southside submarket is currently leading in multifamily development, with over 1,400 units under construction, closely followed by the Saint Augustine submarket, which has over 1,300 units in development.
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.
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.
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.
In May 2023, the Chicago Metro demonstrated substantial job growth, adding 81,900 new positions according to the Bureau of Labor Statistics (BLS). This job growth rate of 1.7% continued the strong performance from the earlier quarters of the year. The region saw considerable job gains across various sectors, with the leisure and hospitality sector leading the charge, adding 33,400 new jobs (growth rate of 7.4%). This was closely followed by the education and health services sector, which added 31,300 jobs (growth rate of 4.3%). The financial activities sector also experienced growth, adding 4,000 jobs, reflecting a growth rate of 1.3%. Chicago’s unemployment rate in May was comparably low, matching the national rate of 3.4%. The region continues to showcase robust economic performance with widespread job growth across multiple sectors.
MAY 2023 ANNUAL JOBS CREATED
MAY 2023 EMPLOYMENT GROWTH
May 23 Unemployment rate
3.4% us may rate
Change from May 2022
to May 2023: 33,400
Percent Change: 7.4%
Change from May 2022
to May 2023: 3,600
Percent Change: –0.4%
Change from May 2022
to May 2023 – 31,300
Percent Change 4.3%
Change from May 2022
to May 2023 – 300
Percent Change -0.2%
Change from May 2022
to May 2023 – 4,000
Percent Change – 1.3%
| Sector | Change from May 2022 to May 2023 | Percent Change |
|---|---|---|
| Leisure and hospitality | 33,400 | 7.4% |
| Professional and business services | (3,600) | -0.4% |
| Education and health services | 31,300 | 4.3% |
| Mining, logging, and construction | (300) | -0.2% |
| Financial activities | 4,000 | 1.3% |
| Government | 5,000 | 1.0% |
| Manufacturing | 8,200 | 2.0% |
| Other services | 3,400 | 1.8% |
| Information | (2,600) | -3.2% |
| Trade, transportation, and utilities | 3,100 | 0.3% |
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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.
