$1,587 2Q 2024
-3.3%
90.4% 2Q 2024
-130 BASIS POINTS
3,612 [YTD: 2,551]
5,064 [YTD: 1,638]
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In Q1 2024, Atlanta’s apartment market displayed a resurgence in demand, with a net absorption of 3,612 units, which represented approximately 70% of the units completed during the same period. However, multifamily operators are still grappling with elevated vacancies due to a surplus of units delivered in previous quarters that remain unleased. Outlying Gwinnett County and Bartow County continued to be primary centers of demand. Notably, Outlying Gwinnett County recorded a net absorption of 451 units, remarkable given that there were no new completions in the area.
Atlanta continues to experience an unprecedented surge in rental housing supply. In 2023, the market saw the addition of 22,117 new units, which expanded the rental stock by 4.3%. This momentum carried into Q1 2024, with 5,064 units delivered and an additional 15,000 units expected to come online over the next four quarters. Urban hubs within Atlanta have been particularly active in terms of development. Midtown Atlanta is leading the way in inventory expansion with 3,116 units currently under construction. This is followed closely by North Gwinnett, West Midtown Atlanta, North Atlanta, and Downtown Atlanta, each with over 2,000 units in progress.
The recent surge in apartment housing supply in Atlanta has significantly impacted occupancy levels, leading to a year-over-year decline of 130 basis points and a quarterly decrease of 20 basis points, reducing the average market occupancy rate to 90.4%. Occupancy rates across various submarkets showed substantial variation, from as low as 83.6% in South Fulton to as high as 97.4% in Lamar County. While suburban areas continued to see growing demand, urban regions experienced the brunt of the increased supply pressures, with most urban areas posting occupancy rates below 90%. Despite these challenges, five submarkets recorded positive year-over-year improvements in occupancy rates, with the highest increase reaching 3.1%.
The addition of over 23,700 new rental housing units in the past year has significantly increased competition within the Atlanta rental market. This surge in supply presents a short-term challenge, constraining operators’ ability to increase rents as new projects compete for tenants. As a result, effective rents saw a slight quarterly decline of 0.1% and a more substantial annual drop of 3.3%, bringing the average effective rental rate down to $1,587.
Among Atlanta’s thirty-nine submarkets, only fourteen experienced annual rent increases in the first quarter. Notably, Walton County recorded a significant 11.4% annual increase. In contrast, core areas such as Downtown Atlanta, Buckhead, and West Midtown Atlanta faced rent declines of 5.9%, 5.6%, and 5.6%, respectively. The rental market is likely to continue its sluggish performance for much of the year, though a modest recovery in rates is anticipated by year-end. This lays the groundwork for potentially stronger rental growth, which could accelerate to between 3% and 4% in 2025.
Average Monthly Mortgage Payment
Average Monthly Rent
Despite headwinds, investor interest in Metro Atlanta remains healthy in relative terms considering the state of capital markets. This is underscored by its status as one of the top ten most active markets for apartment transactions as of Q1 2024. Preliminary data from MSCI for the first quarter of 2024 shows a transaction volume of $511.6 million across eleven individual conventional multifamily properties, marking a 2.2% increase from the first quarter of 2023. While current transaction activity is relatively robust, it remains markedly lower by historical standards. Between 2014 and 2023, Atlanta typically averaged around 40 deals and $1.126 billion in transaction volume during the first quarter. Long-term price appreciation trends highlight Atlanta’s appeal to investors, with market prices per unit having increased by approximately 25% over the past five years. Looking ahead, the market faces challenges as it must absorb record supply deliveries and manage declining occupancy rates, factors that could potentially impact property values.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
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Under 35 Years
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35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
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75 to 84 Years
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85 Years & over
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|---|---|---|---|---|---|---|
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0.2%
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-.09%
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-.09%
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0.5%
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0.8%
|
0.2%
|
0.0%
|
The 66-74 age group is the fastest expanding renter demographic in the Chicago-Naperville-Elgin metro area, showing a 0.8% growth from pre-pandemic 2019 to 2022. This suggests an increasing demand for rental housing that caters to an aging population.
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 mid-2024, following a period where new units consistently outpaced net absorption.
Positive year-over-year rent growth is anticipated by the end of this year. 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.
