How is the Atlanta apartment market performing?
Renewed job creation and the formation of new
households will continue to stabilize the Atlanta apartment market and set the
stage for steady improvement in fundamentals in 2011. Over the remainder of
this year, renter demand will fluctuate as the private sector slowly begins to
hire workers and temporary government positions are eliminated. With job growth
remaining below pre-recession levels, rents will continue to fall, albeit at a
reduced pace from a year ago. Concessions will remain necessary to attract price-sensitive
renters and will not burn off significantly this year for most properties.
Additionally, the completion of new units will decrease from a year ago, but
lease-ups will be somewhat slow amid recovering but subdued renter demand.
Absorption of recent additions to supply will pick up next year, though, as
demand strengthens and construction slows.
Describe the multifamily investment sales market in
Atlanta. What are investors doing in Atlanta to position themselves for the
recovery?
Large, institutional-grade properties will continue to
account for much of the activity in Atlanta in the near term, while the market
for performing, stabilized assets will gain momentum gradually. Stabilized REO
properties, defined as cash-flowing assets with high occupancy, have started to
trade with greater frequency in the region as lenders step up efforts to
resolve troubled loans. Offering cap rates range from 8.5 percent to 9.5
percent and mark a reversion to pricing norms that existed before the run-up in
values in 2005 and 2006.
In addition to these properties, investors remain
highly interested in distressed, high-vacancy assets that can now be purchased
at prices often much lower than the prevailing marketwide median. Overall,
investment activity will become more normal and sustainable as an economic
recovery picks up steam and bolsters the metro area’s stature as a diverse
job-creation engine capable of significant growth for extended periods.
Numerous investors purchasing assets at their current low prices anticipate
steady returns over the five-year horizon.
Over the longer term, institutions eager to place
money will continue to look to Atlanta, where a large stock of top-quality
assets provides an outlet for capital. Properties located in the core of the metro
will garner the greatest investor attention due to relatively consistent renter
demand.
John M. Leonard is a first
vice president and regional manager of the Atlanta office of Marcus & Millichap Real Estate
Investment Services. Contact him at [email protected]
or (678) 808-2700.
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