Atlanta, GA Multifamily Market Report
Market Overview
The current state of Atlanta’s multifamily market reflects a significant deceleration in absorption and a slowdown in rent growth. Inflationary pressures have had a pronounced impact on leasing activity, particularly in Class C properties. In terms of sales volume, Atlanta multifamily recorded $8.3 billion over the past 12 months, surpassing the historical average of $4.7 billion for multifamily asset transactions. However, transaction activity in the past three quarters has declined significantly, representing only about one-third of the level observed in the same period the previous year. This is primarily due to the impact of rising interest rates. Despite these challenges, major institutional investors remain optimistic about the market’s long-term potential. They are driven by anticipated population and job growth, which fuels the continuous demand for multifamily. These investors continue to acquire new properties, even in submarkets that have recently experienced negative rent growth. Consequently, Atlanta has emerged as a top destination for multifamily investors, ranking among the top three markets for apartment investment in the past year.
Job Growth
Atlanta’s job market has made a robust recovery from the pandemic, surpassing its pre-pandemic job levels with a five percent increase compared to February 2020. The office-using sectors, including finance, professional services, and tech, have exhibited the strongest job growth, with a remarkable rate of over 10 percent since Q1 2020. Despite recent concerns arising from layoffs at tech giants like Google and the postponement of Microsoft’s Westside campus plans, Atlanta remains an appealing market for corporate relocations. Major companies such as Microsoft, Google, Cisco, Invesco, Micron, and Norfolk Southern have chosen to establish new offices in the city, demonstrating its continued allure.
The healthcare sector in Atlanta has also experienced substantial job growth, driven by the construction of new facilities to cater to the expanding population’s needs. Although industrial sectors have faced challenges due to sluggish consumer spending and increasing automation, blue-collar job growth has been supported by the presence of companies like Amazon, Home Depot, HelloFresh, and Goodyear. Furthermore, Atlanta’s emergence as a prominent electric vehicle manufacturing hub is poised to generate significant employment opportunities. Noteworthy projects by SK Innovation and Rivian are anticipated to create thousands of jobs, positioning Atlanta as a key player in the electric vehicle battery manufacturing industry.
Atlanta’s transportation and logistics hub status, bolstered by the prominent Hartsfield-Jackson Atlanta International Airport, continues to attract both residents and corporations. Norfolk Southern, for instance, relocated its corporate headquarters to Midtown in 2021, contributing around 850 new jobs with salaries averaging above $100,000. The airport, along with generous tax incentives, has also helped the region’s growing film and entertainment industry, which is responsible for $3 billion in annual direct spending in the state.
Moreover, Atlanta boasts lower living and business costs compared to major East and West Coast metros, positioning it as a competitive destination. This advantage is expected to drive further population growth and job opportunities, sustaining Atlanta’s upward trajectory in economic development.
The population of metro Atlanta has grown by more than 900,000 residents since 2010, representing one of the largest nominal gains in the country. Source: CoStar Group
Vacancy Rate & Net Absorption
Absorption in Atlanta’s multifamily market has remained stagnant, and the vacancy rate has increased to 10.5 percent from record lows of around five percent two years ago. This increase in vacancies can be attributed to the significant number of ongoing construction projects. Notably, the absorption slowdown has been most evident in 1- and 2- Star and 3 Star properties, indicating that the increasing cost of living may be impeding household formation, particularly among low- and middle-income groups. Additionally, inflation in Atlanta has been higher than in other metro areas, reaching 7.1 percent in February 2023, which may further impact affordability. Nevertheless, Atlanta’s multifamily market shows promise due to robust net domestic migration and population growth, aligning with other major Sunbelt metros.
Rent Growth
Rent growth for 3 Star properties in Atlanta is at -1.9 percent, while 1- and 2-Star properties show the highest posted rents, raised by 3.3 percent over the past year. 4- and 5-Star experienced year over-year growth of -2.7 percent, considerably down from the record growth of over 15 percent in 2021. With lower rental rates, submarkets with positive rent growth are found outside the urban core. Westside Atlanta maintains nearly four percent rent growth over the past year, with rents averaging less than $1,300 a month. Southeast DeKalb County has rent growth of roughly two percent, with monthly rents approaching $1,300 as well.
New Developments/Net Absorption
Despite facing a slight decline in new construction starts in recent quarters, Atlanta’s apartment construction pipeline still remains close to its record levels. Currently, there are 34,000 units under construction, which represents a 6.8 percent expansion of Atlanta’s existing market-rate inventory. Higher-end properties, specifically 4- and 5-Star units, dominate the under-construction pipeline, accounting for more than threequarters of the projects.
