Research & Forecast Report ATLANTA Q2 2015 | Multifamily Atlanta Multifamily Market Remains Strong Key Takeaways > Effective rents have increased 2.7% 2Q15 vs. 1Q15, and 7.3% annually. > Highest 2nd Quarter rent growth was in these submarkets: South Atlanta suburbs (9.2%), Duluth (5.3%), Smyrna (5.0%), Southeast Marietta (4.9%), and West Marietta (4.4%). > Continued job growth of 3% annually in the region has brought the unemployment rate down to 5.9%. > Mid-Year 2015 occupancy rates have remained high at 94.2% amongst increasing inventory. These high occupancy rates are driven by sustained demand particularly for middle and top-tier product in the northern and central parts of the city. > Expansion continues in Atlanta at a rate of 1.4% YoY with 7,997 units added in 2Q15. Atlanta Multifamily Market Atlanta’s multifamily market has remained strong with a continued rent growth of 2.7% in the 2nd quarter of 2015. Year-over-year rent growth is at 7.3% putting Atlanta in the top ten of all major metros and number one in the Southern region. The foundation to this growth is a strong, robust economy along with limited new construction in the market. Demand has remained solid in the Atlanta metro due to continuous employment growth and corporate expansions. Atlanta ranked number 4 nationally for job growth in the 12-month period ending in June, adding over 77,000 jobs. The locations of these jobs tend to be centered around the city lending more desirability for apartments in urban settings. Notable for the quarter, Porsche has opened its new North American headquarters near Hartsfield-Jackson International Airport which will have 400+ employees. Other corporate expansions announced in the quarter include Kaiser Permanente, Sage Group, Courion, and Google. High demand has kept occupancy rates at 94.2% for the quarter even amongst new units being added to the region. US SOUTH ATLANTA Source: MPF Research Historical Apartment Occupancy & Rents Market Indicators Relative to prior period ATL Q2 2015 ATL Q3 2015* VACANCY RENTS CONCESSIONS TRANSACTIONS PRICE PER UNIT CAP RATES - - *Projected 89% 90% 91% 92% 93% 94% 95% 96% 97% 2013 2014 2015 Occupancy % $400 $600 $800 $1,000 $1,200 $1,400 2013 2014 2015 AVG Monthly Rent
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Research & Forecast Report
AtlAntAQ2 2015 | Multifamily
Atlanta Multifamily Market Remains StrongKey Takeaways > Effective rents have increased 2.7% 2Q15 vs. 1Q15, and 7.3% annually.
> Highest 2nd Quarter rent growth was in these submarkets: South Atlanta suburbs (9.2%), Duluth (5.3%), Smyrna (5.0%), Southeast Marietta (4.9%), and West Marietta (4.4%).
> Continued job growth of 3% annually in the region has brought the unemployment rate down to 5.9%.
> Mid-Year 2015 occupancy rates have remained high at 94.2% amongst increasing inventory. These high occupancy rates are driven by sustained demand particularly for middle and top-tier product in the northern and central parts of the city.
> Expansion continues in Atlanta at a rate of 1.4% YoY with 7,997 units added in 2Q15.
Atlanta Multifamily MarketAtlanta’s multifamily market has remained strong with a continued rent growth of 2.7% in the 2nd quarter of 2015. Year-over-year rent growth is at 7.3% putting Atlanta in the top ten of all major metros and number one in the Southern region. The foundation to this growth is a strong, robust economy along with limited new construction in the market.
Demand has remained solid in the Atlanta metro due to continuous employment growth and corporate expansions. Atlanta ranked number 4 nationally for job growth in the 12-month period ending in June, adding over 77,000 jobs. The locations of these jobs tend to be centered around the city lending more desirability for apartments in urban settings. Notable for the quarter, Porsche has opened its new North American headquarters near Hartsfield-Jackson International Airport which will have 400+ employees. Other corporate expansions announced in the quarter include Kaiser Permanente, Sage Group, Courion, and Google. High demand has kept occupancy rates at 94.2% for the quarter even amongst new units being added to the region.
2 Research & Forecast Report | Q2 2015 | Atlanta Multifamily | Colliers International
Atlanta Multifamily Market (continued)Another factor in the strong multifamily market is generational. Millennials, whose ages range from 18 to 34, are not buying homes at the same rate as previous generations. The average first time home buyer today rents for six years before buying a home compared to two and half years in the early 1970s. This is largely due to the fact millennials do not have the financial savings to afford the down payment on many of the homes in the market. Rental growth rates across the country have grown at twice the pace of wage growth. In Atlanta, wages have grown at 2% in the twelve month period ending June 2015, compared to a 7.3% increase in rental rates during that same period. This has created further demand for multifamily rental housing.
While demand remains strong, Atlanta’s supply of apartments is certainly on the upswing albeit at a manageable pace. Inventory
growth has remained under 2% for the past three years with 7,997 units added in 2Q15. Absorption in the market for 2Q15 was 4,552 units. Approximately 13,000 units were under construction in 2Q15 with 85% being located in Downtown, Midtown, and Buckhead submarkets. This is largely due to high demand for product in these submarkets which has allowed many completed developments to command rents north of $2.50 per square foot.
To sum, we can expect rents to continue to increase in the future with strong demand prospects and limited new inventory entering the market. Another trend to watch for the future is the growth of baby boomers in the apartment marketplace. The population ages 65 and older will grow to over 50 million by 2019 up from around 30 million in 1989. This is expected to fuel future rent demand as many empty nesters will seek to downsize their household and enjoy many of the conveniences renting an apartment vs. owning a home provides.
Historical Investment Volume & Cap Rates
UPDATE - Recent Transactions in the Market
Notable Sales Activity
PROPERTy SUbMARkET SAlES DATE SAlE PRIcE SIzE (UnITS) PRIcE / UnIT bUyER
Manchester at Mansell Apts. North Fulton 5/8/2015 $48,500,000 468 $103,632 Titan Real Estate Investment
Sales Volume AVG Cap Rate
AtlANtA MultifAMily
Apartment investment volume as of mid-year 2015 in Atlanta is almost half of the amount in all of 2014. Around 87 properties with a total of 19,784 units have sold to date. According to Real Capital Analytics, the average price per unit in Atlanta decreased to $95,984 which is lower than last quarter, but still 24% higher than a year ago. The average cap rate for apartments in the Atlanta market has remained practically unchanged from last quarter at 6.6%.
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Source: Real Capital Analytics
Source: CoStar Comps
3 Research & Forecast Report | Q2 2015 | Atlanta Multifamily | Colliers International
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Sugar Hill
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Lawrenceville
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Braselton
Norcross
Snellville
Stone Mountain
Lithonia
Conyers
Covington
McDonough
Jonesboro
Fayetteville
Peachtree City
Palmetto
DORAVILLE
CHAMBLEE
Clarkston
DECATUR
SMYRNA
Powder Springs
Austell
Douglasville
Lithia Springs
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Riverdale
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Stockbridge
Union City
Fairburn
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Multifamily Pipeline | Urban Atlanta Sources: CoStar Property, MPf Research
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UNDER CONSTRUCTION
# Name Developer/Owner Address Market Units
1 Broadstone Court Alliance Residential Company 3091 Maple Dr Buckhead 250
2 (not yet named) Abraham Properties & Builders 675 North Highland Ave NE Midtown 124
3 Elan Inman Station Crim & Associates 144 Moreland Ave NE Downtown 285
4 Square on Fifth Gateway Development Services 848 Spring St NW Midtown 220
5 Peachtree Apartments 782 Peachtree St NE Midtown 294
Mercedes-Benz relocates headquarters to Atlanta bringing 400 existing employees to the state and creating 600 new jobs > Atlanta Business Chronicle - February 2015
Kaiser Permanente to put it campus in Midtown Atlanta and create 900 new jobs > Atlanta Business Chronicle - April 2015
Kaiser Permanente eyes Alpharetta for new business unit, could employ several hundred > Atlanta Business Chronicle - July 2015
Coke moving 500 people to city, leaving Cobb County > Atlanta Business Chronicle - June 2015
Sage Software confirms plans to create 400 jobs in Midtown > Atlanta Business Chronicle - June 2015
lincoln financial adding hundreds of jobs, moving to RiverEdge Summit > Bisnow Atlanta - July 2015
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Source: U.S. Census Bureau
Source: US Dept. of Labor Statistics/Moody’s Analytics
Source: Bureau of Labor Statistics; Metro Level Data May 2015 Average, not Seasonally Adjusted
Atlanta News
6 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International