MARKET REPORT

MULTIFAMILY
Atlanta Metro Area Q3/19
In-Migration and Job Growth Boost Rental Demand;
Builders Add High-End Apartments Multifamily 2019 Outlook

Employment growth continues to pace above the national rate. CONSTRUCTION:

Atlanta’s economic strength has been drawing an increased number of
The delivery schedule will increase in-
white-collar jobs to the metro, bolstering the high-end apartment market.
ventory by approximately 2 percent, just
Since 2014, strong apartment construction has delivered roughly 45,000
new units, more than double the deposit from the previous five years. 8,900 UNITS
will be completed
edging out last year’s total deposit, which
was 8,800 apartments.
While builders have been advancing inventory, the metro’s economic
growth has expanded the renter pool. Employment gains in the con-
struction and health services sectors have resulted in robust household
creation and demand for Class B and C units. Renter demand surpassed
VACANCY:
the new additions, compressing vacancy 130 basis points over the past
five years. Strong in-migration and job creation will support apartment Vacancy will decrease to 4.7 percent in
2019. Last year, apartment vacancy fell 80
demand, underpinning performance into next year.
60 BASIS POINT
decrease in vacancy
basis points from 6.1 percent.
Development maintains torrid pace in Atlanta. The construction boom
over the past five years has added tens of thousands of luxury apartments
to the metro’s inventory. During this expansion, more than 55,000 units
have been absorbed, driving vacancy down 100 basis points to 4.9 percent
at the end of the second quarter. Builders anticipate the demand trends
RENT:
will continue as there are currently 3,700 units under construction with The average effective rent will climb
to $1,285 per month in 2019. Slightly
completion dates before the year’s end. The largest project, a 399-unit
apartment complex, Modera Buckhead, is on pace to deliver in August. 6.4% INCREASE higher than the trailing four-year average
Buckhead leads the way among submarkets with 1,200 rentals set to in effective rents change of 6.2 percent.
finalize during the second half of the year. The Midtown Atlanta area also
expects a strong delivery with 650 units nearing completion.

Investment Trends
• Deal flow remained consistent over the past year as strong trading
Local Apartment Yield Trends velocity in the first half of this year has bolstered the annual sales count.
Apartment Cap Rate 10-Year Treasury Rate Over the past three years, property turnover has been high, likely im-
pacting the short supply currently available on the market.
12%
• Through the first half of 2019, investors have been particularly active
9% in the Southeast DeKalb submarket, as well as Westside Atlanta. Last
year’s most active locales were the Cumberland/Galleria area and
Rate

6% Clayton County.

3% • Dekalb apartment trades in 2019 have been primarily large properties

with more than 170 units. Westside Atlanta has a better inventory of
0% smaller Class C multifamily assets, drawing private investors looking
9* 01 03 05 07 09 11 13 15 17 19*
for older assets with fewer than 100 units.

• Average cap rates have tightened moderately, dipping into the high-5
Sales Trends percent range. South Atlanta can provide opportunistic buyers with
first-year yields reaching the upper-7 percent zone.
Sales Price Growth
* Cap rate trailing 12-month average through 2Q
er Unit (000s)

Sources: CoStar Group,

$160 Inc.; Real Capital Analytics 30%
Year-over-Y

$120 15%
 Employment Trends 2Q19 Yield
Local Apartment – 12-Month
Trends Period
Metro United States Apartment Cap Rate
EMPLOYMENT
10-Year Treasury Rate
6%
12% 1.9% increase in total employment Y-O-Y
Year-over-Year Change

3%
9%
• Over the past year ended in June, Atlanta added 53,400 positions
to the metro. The growth was less than the previous yearlong

Rate
0%
6% period when payrolls expanded by 2.2 percent.

-3% • The professional and business services sector posted the largest
3%
increase with more than 19,000 new roles filled. The metro did
-6% 0% post a loss in the financial activities sector.
09 10 11 12 13 14 15 16 17 18 19* 01 03 05 07 09 11 13 15 17 19*

Completions and Absorption Sales Trends

Completions Absorption Sales CONSTRUCTION
Price Growth

16 Average Price per Unit (000s)

$160
10,200 units completed30%Y-O-Y

Year-over-Year Growth
Units (000s)

$120 15%
12 • Over the past year ended in June, the metro received approximately
1,000 units fewer than the previous annual deposit of 11,200 units.
$80 0%
8 The current pipeline has nearly 19,000 units under construction
with delivery dates stretching into 2021.
4 $40 -15%
• Midtown Atlanta again leads the way with nearly 1,900 units added
0 $0 to the submarket’s inventory in the past 12-30%
months. Buckhead
09 10 11 12 13 14 15 16 17 18 19* 09 10 11 12 13 14 15 16 17 18 19*
posted the next largest deposit with approximately 1,700 new units.

Vacancy Rate Trends

Metro United States VACANCY
12%
60 basis point decrease in vacancy Y-O-Y
10%
Vacancy Rate

• The metro vacancy rate fell to 4.9 percent since June 2018. High
absorption during another year of elevated construction showed
8%
the strength of demand in the metro.

6% • Atlanta’s luxury apartment vacancy compressed 60 basis

points to 5.8 percent. Class B and C apartment vacancies also
4% compressed to 4.6 and 4.3 percent, respectively.
09 10 11 12 13 14 15 16 17 18 19*

Rent Trends
Monthly Rent Y-O-Y Rent Change RENT
$1,500 12%
6.7% increase in the average effective rent Y-O-Y
Year-over-Year Change
Monthly Effective Rent

$1,250 6% • The average effective rent increased 6.7 percent to $1,247 per month
during the annual period ended in June. Southeast DeKalb County ,
$1,000 0% Smyrna and the Far South Atlanta Suburbs underpinned the metro’s
growth with double-digit rate increases.
$750 -6%
• The metro’s lower-end units posted the largest annual rent changes
$500 -12% with the Class C average rising 7.4 percent and the Class B lifting 7.3
09 10 11 12 13 14 15 16 17 18 19* percent. Class A average effective rent rose 6.8 percent.

* Forecast
Source: CoStar Group, Inc.
 Demographic Highlights

2Q19 Median Household Income 2Q19 Affordability Gap Multifamily (5+ Units) Permits

Metro $67,765 Renting is $144 Per Month Lower 10,203 1H 2019

U.S. Median $64,784 Average Effective Rent vs. Mortgage Payment* h 19% Compared with 1H
2016-2018

2Q19 Median Home Price Five-Year Household Growth** Single-Family Permits

Metro $229,192 183,200 or 1.6% Annual Growth 23,787 1H 2019

Compared with 1H
U.S. Median $269,186 U.S. 1.0% Annual Growth h 5% 2016-2018

*Mortgage payments based on quarterly median home price with a 30-year fixed-rate conventional mortgage, 90% LTV, taxes, insurance and PMI. **2019-2024 
Annualized Rate

SUBMARKET TRENDS SALES TRENDS

Atlanta Draws Buyers With Solid Fundamentals
Lowest Vacancy Rates 2Q19**
Employment Trends
And Broad Range of Inventory
Local Apartment Yield Trends
Metro Y-O-Y United
AverageStates • Average pricing on multifamily
Apartment Cap Rate assets in the Atlanta
10-Year metro
Treasury appreciat-
Rate
Vacancy Y-O-Y %
Submarket 6% Rate
Basis Point Effective
Change
ed by 16 percent since June of 2018. The average sales price per unit
Change Rent
has risen to
12%nearly $122,000 during the first half of this year.
Year-over-Year Change

3%
Smyrna 4.3% -70 $1,256 10.7% • Second quarter trading velocity is up approximately 20 percent from
9%
the last year as the market rebounds from a relatively slow trading
Rate

0%
Norcross 4.4% -70 $1,069 5.0% year in 2018.
6%

-3%
Outlook: Private investors looking for value-add opportunities are
Clayton County 4.5% -40 $895 8.9% 3%
focusing their attention on the Westside, while institutional buyers will
-6%
continue to target
0%
larger assets in the metro’s higher-priced submarkets.
South Atlanta 4.6% -120 $900 8.3%
09 10 11 12 13 14 15 16 17 18 19* 01 03 05 07 09 11 13 15 17 19*

Alpharetta/Cumming 4.6% -70 $1,450 6.0%

Completions and Absorption Sales Trends

South Fulton County 4.6% 20 $920 7.9%
Completions Absorption Sales Price Growth

Briarcliff 4.7% -120 $1,359 3.8%

Average Price per Unit (000s)

$160 30%
16
Year-over-Year Growth

Chamblee/Brookhaven 4.9% -30 $1,421 5.3%

Units (000s)

$120 15%
12

Sandy Springs 8 5.8% -40 $1,342 6.8% $80 0%

Virginia Highlands/ 4 $40 -15%

6.1% -130 $1,594 2.8%
Morningside
0 $0 -30%
09 10 11 12 13 14 15 16 17 18 19* 09 10 11 12 13 14 15 16 17 18 19*
Overall Metro 4.9% -60 $1,247 6.7%
* Trailing 12 months through 2Q19
** Includes submarkets with more than 15,000 units of inventory Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics
Vacancy Rate Trends
Metro United States
12%
 CAPITAL
CAPITALMARKETS
MARKETS
2Q19* Apartment Acquisitions
By Buyer Type By DAVID G. SHILLINGTON, President,
Marcus & Millichap Capital Corporation
Other, 1.2% Cross-Border, 8.8%
• Fed takes action to sustain economic momentum. The combi-
nation of trade disputes between the U.S. and China together with
Equity Fund slowing European growth converged to weigh on the global eco-
& Institutions, 21.8%
nomic outlook, sparking action by the Federal Reserve. To combat
the restraints on growth, largely driven by uncertainty surrounding
Private, 64.6% international trade, the Federal Reserve cut its overnight rate by
Listed/REITs, 3.6% 25 basis points and halted its balance sheet reductions, known as
quantitative tightening. Though this action runs the risk of lifting
inflation pressure, the Fed has communicated its willingness to let
the economy “run hot.” Many believed the Fed action would offer a
Apartment Mortgage Originations
boost to domestic markets until the trade war was escalated imme-
By Lender
diately after the Fed announcement. This new bout of uncertainty
100% pushed the 10-year Treasury yield below 2 percent for the first time
since 2016. Though domestic growth has moderated, the nation’s
Percent of Dollar Volume

Gov't Agency
75% economic foundation remains solid, headlined by the tight labor
Financial/Insurance
Nat'l Bank/Int'l Bank market and muted inflationary pressure. Fed officials will continue
50%
Reg'l/Local Bank to focus on economic risks spilling over from the trade war with
CMBS China, potentially calling for additional rate reductions this year.
25%
• Abundant liquidity balances conservative underwriting. Debt
0% financing for apartment assets remains strong, supported by a va-
14 15 16 17 18 riety of lenders. However, Fannie Mae and Freddie Mac, two main-
stay apartment capital sources, will step to the sidelines in the sec-
* Trailing 12 months through 2Q19
Includes sales $2.5 million and greater
ond half of the year as they reach their lending caps on market rate
Sources: CoStar Group, Inc.; Real Capital Analytics assets. The Government Sponsored Enterprises will remain active
lenders for “uncapped business,” including environmentally sus-
tainable and affordable housing properties. A wide range of local,
National Multi Housing Group regional and national banks; pension funds; insurance companies
John Sebree and CMBS sources will remain active. All have responded to the
First Vice President, National Director | National Multi Housing Group falling interest rate climate by reducing mortgage rates, but lender
Tel: (312) 327-5417 | [email protected] spreads have widened as the 10-year Treasury rate has fallen. Given
the downward pressure on interest rates, lender caution has risen,
Prepared and edited by
particularly for construction loans. Though lending is still available
Jonathan Ferrendelli
Research Associate | Research Services for these types of projects, investors may need to blend mezzanine
debt with other capital sources until they prove out their concepts
For information on national apartment trends, contact: and substantially fill units. For stabilized existing assets in most
John Chang major markets, financing remains plentiful.
Senior Vice President, National Director | Research Services
Tel: (602) 707-9700 | [email protected]

Atlanta Office: Michael Glass First Vice

michael.glass@marcusmillicha
Price: $250 Michael Fasano First Vice President/Regional Manager
1100 Abernathy Road N.E., Bldg. 500, Suite 600 Cleveland Office:
Atlanta, GA 30328 5005 Rockside Road, Suite 800
© Marcus & Millichap 2019 | www.MarcusMillichap.com (678) 808-2700 | [email protected] Independence, OH 44131
(216) 264-2000

Columbus Office:
230 West Street, Suite 100
Columbus, OH 43215
(614) 360-9800
Austin
The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain Office:and complete information; however, no representation, warranty or guarantee,
accurate
express or implied, may be made as to the accuracy or reliability of the information contained herein. Note: Metro-level employment growth is calculated based on the last month of the quarter/year. Sales data
Craig Swanson Vice President/Regional Manager
includes transactions valued at $1,000,000 and greater unless otherwise noted. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide
Cincinnati Office:
9600 North Mopac Expressway, Suite 300
specific investment advice and should not be considered as investment advice. Austin, TX 78759
(512) 338-7800
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Experian; National Association Moody’s Analytics; Real Capital Analytics; RealPage, Inc.;Colby
| [email protected]
of Realtors; TWR/DodgeHaugness Region
600 Vine Street, 10th Floor
Pipeline; U.S. Census Bureau
Cincinnati, OH 45202
(513) 878-7700 | colby.haugnes