Investing in the Growing Atlanta, GA Multi Family Market
Atlanta Multi Family Real Estate Market by the Numbers
Atlanta's dynamic multi family real estate market makes it one of the best cities for multifamily investing.
The sector took a hit at the onset of the coronavirus pandemic but bounced back quickly with impressive rent growth in recent quarters.
- Since Covid, rents are increasing at a rate faster than the National Index as owners have capitalized on a surge in demand and low vacancy across the region, especially in 3 star / B-class properties.
- Year-over-year rent growth of 5.0%, while in line with the national average, is less than the elevated inflation levels of Q2/22. This is largely due to the tepid net absorption of new units in late 2021 and early 2022.
- The region's vacancy rate of 7.6% is still comfortably below its 10-year average of 8.0%, so Atlanta apartment owners should be able to increase rents as long as the metro's economic recovery persists.
Heading into the pandemic, Atlanta was helped by overall housing construction levels that were lower than prior building cycles. Despite an increase of both single-family and multifamily housing starts over the past few quarters, annual single-family home deliveries are still roughly half of what they were during the housing bubble in the mid-2000s, and multifamily construction activity is only slightly above the national average on a percentage basis.
Atlanta Growth and Migration Trends
Like DFW, Houston, and Phoenix, Metro Atlanta ranks as a top U.S. market for net migration and population growth. Atlanta, GA has grown by more than 900,000 residents since 2010, representing one of the largest nominal gains in the country.
The Atlanta region produces more than 40,000 college graduates annually, ranking it among the top 10 metros nationwide. Atlanta also attracts well-educated workers, most notably from the Northeast.
More than a dozen business incubators support a collaborative environment between the State of Georgia, private businesses, and the academic community. According to CoStar, Atlanta's status as a tech hub was a factor in attracting firms like Norfolk Southern, Google, Microsoft, Cisco, and Visa, all of which are setting up large-scale operations in the area.
Factors Driving Atlanta's Multi Family Market
Perhaps the most interesting aspect of Atlanta’s multi family real estate environment is its deep pool of renters-by-necessity, a cohort buoyed by the market's extensive blue-collar industries, particularly the industrial sector. These jobs support a strong 2-star / C+ workforce housing property class that is in extremely high demand, particularly in submarkets like Douglas, Gwinnett, Henry, and Southeast DeKalb Counties.
Due to the lack of new workforce housing supply and a stable and growing base of industrial jobs, occupancy in blue-collar suburban submarkets are at or near record highs. To that end, the metro is adding thousands of industrial jobs via Amazon, Home Depot, Freshly, and HelloFresh, all of which will boost workforce housing in the near term.
Atlanta Multi Family Real Estate Investment Trends
Investors have poured capital into Atlanta, GA multifamily real estate at a record clip over the past few quarters, drawn by the market's impressive performance and strong demographic trends. The metro now ranks as one of the top markets in the nation for trailing 12-month sales volume. Average pricing continues to escalate, and values in Atlanta are rising at double the national pace.
Throughout the past decade, rent growth has outperformed the national average. That is unusual for a supply-heavy market such as Atlanta. Rents in Atlanta are now slightly above the national average, while they were more than 15% below the national figure in 2010.
Atlanta Multi Family Real Estate Construction Trends
Atlanta now has about 6.5% of total inventory (31,000 units) under construction, representing the metro's largest construction pipeline in more than a decade. Even so, and contrary to its reputation as an easy-to-build metro, Atlanta has been restrained in building apartments relative to its peer markets over the past several years as it has added only 80,000 units since 2010, a number that pales in comparison to similarly sized markets like Dallas-Fort Worth (210,000 units) and Houston (145,000 units) and is more in line with smaller, fast-growing metros like Charlotte (75,000 units) and Austin (105,000 units).
Atlanta Multi Family Real Estate Investing Trends
Out-of-state firms accounted for roughly 80% of buyer volume over the past four quarters; a trend that has always been present but is accelerating.
National and institutional investors drawn to Atlanta because of the region's solid demographics and job growth, more limited construction pipeline compared to other high-growth Sun Belt metros, and lower pricing compared to coastal markets.
Cap rates are now lower than the National Index and have continued to drift lower since the pandemic's start. Additionally, Atlanta's price appreciation has outpaced the national benchmark over the past 12 months. While sales volume has increased in every major Atlanta submarket, the suburbs have seen the most significant increases. Many new properties in the metro's exurbs are now fetching upward of $300,000/unit.
Atlanta Economic Growth Trends
The Atlanta economy is girded for a recession, should one ultimately take root in the second half of 2022.
Atlanta has long since recovered all jobs lost in the pandemic. In fact, with 22Q4 approaching, the area is approaching 3 million non-farm employees for the first time.
Office-using sectors have rebounded quicker than the Atlanta market average and are now well above their respective pre-pandemic peaks. A handful of large corporations are in the process of adding thousands of high-paying office jobs including Microsoft, Google, FanDuel, Visa, Cisco, Micron, and Norfolk Southern.
- Walmart announced it is opening a major tech hub in Atlanta.
- TK Elevator and Papa Johns opened new American headquarters
- FinTech firm Deluxe Corporation added 700 jobs in Central Perimeter
- Mailchimp is expanding its local presence on the Eastside
- Carvana is opening a major office in Central Perimeter
- Airbnb and Nike are establishing hubs in West Midtown.
Several Fortune 500 firms are also setting up technology-related operations including BlackRock, Facebook, Anthem, and Honeywell. Atlanta has a lower concentration of education and health services employment than the national average, but that sector has seen substantial job growth over the past few years.
Multiple healthcare systems are constructing new facilities, and the sector is poised to grow to adequately service the metro's growing population. Piedmont Heart Institute tower, Emory University Hospital, Winship Cancer Institute tower, and Children's Healthcare of Atlanta are each undergoing large expansions.
Atlanta is emerging as a major electric vehicle manufacturing hub, boosting industrial demand and job growth in the coming years. SK Innovation's new facility in Commerce, will employ thousands at full buildout and will serve as one of the world's largest hubs of electric vehicle battery manufacturing. EV maker, Rivian announced it will build a new $5 billion, 7,500-worker electric vehicle manufacturing plant.
Long term, Atlanta will continue to thrive as a major distribution hub. The presence of the busiest airport in the world, Hartsfield-Jackson Atlanta International Airport, will continue to attract residents and corporations. Including the region's growing film and entertainment industry, which is responsible for $3 billion in annual direct spending in the state.
Atlanta boasts lower living and business costs than large East and West Coast metros, and this competitive advantage should continue to boost population and job growth in Atlanta making it one of the best cities for multi family investing.
Atlanta has drawn some of the strongest in-migration in the country over the past few decades, and many employers have openly stated that moving all or a portion of their operations to Atlanta saved them millions without sacrificing access to high-quality labor.
Atlanta Multi Family Real Estate Portfolio Properties
