Multifamily Research

Market Report Third Quarter 2018

Atlanta Metro Area

Job Growth Attracts New Residents,

Fueling Demand for Apartments Multifamily 2018 Outlook

Steady in-migration supports housing demand. A healthy 9,600 units Construction:

pace of hiring since 2010 and a relatively lower cost of living than will be completed Deliveries slow from the
many major markets have motivated many individuals to move to 14,500 units completed in
the Atlanta metro. The influx of new residents, particularly among 2017. Buckhead, Midtown
the 20- to 34-year-old age cohort, which typical rents, continues and Downtown will receive a
to drive a need for apartments throughout Atlanta. To meet this combined 3,800 apartments.
demand, developers have placed roughly 30,000 rentals into
service over the past three years and an additional 17,200 units 20 basis point Vacancy:
are scheduled for completion this year and next. The influx of The net absorption of more than
decrease in vacancy
newer space has weighed on Class A vacancy, slowing effective 10,000 rentals will tick vacancy
rent growth in this segment. down to 5.7 percent in 2018. The
rate climbed 50 basis points last
Apartment renovations proliferate in the suburbs. To year amid an influx of construction.
compete with the inflow of newer spaces, many owners are
remodeling older apartments and expanding amenity packages. 4.6% increase Rents:
These upgrades allow for increases in rents, which remain The average effective rent rises
in effective rents
between $400 and $700 per month more affordable than Class in 2018 to $1,833 per month.
A space. More than 40 apartment complexes metrowide are Last year, an advance of 5.1
under renovation, many of which are in outlying suburbs within percent occurred.
southern Fulton and Clayton counties. Class B/C vacancy rates
in these areas rest at or below the 5 percent equilibrium, driving
rent growth above the metro average.

Investment Trends
• Out-of-state and local buyers are searching marketwide for
Local Apartment Yield Trends properties built after the 1980s with value-add potential. Many
Apartment Cap Rate 10-Year Treasury Rate of these apartment buildings changed hands in the past few
years, limiting the current inventory and straining sales velocity
12% during the past 12 months. Owners with these assets may
consider marketing their properties as pricing remains at record
9% levels.
Rate

6% • The proximity to shopping, entertainment and new development

near SunTrust Park continues to lure renters and investors to
3% the Cumberland/Galleria area. Vacancy in the neighborhood
plummeted 130 basis points during the past four quarters,
0%
00 02 04 06 08 10 12 14 16 18* contributing to above-metro-average rent growth. Cap rates in
Cumberland/Galleria are in the low-6 percent band, on par with
the metrowide average.
Sales Trends • Buyers looking for lower entry costs and higher returns are
Sales Price Growth targeting assets in southwestern suburbs. Here, properties
* Cap rate trailing 12-month average through 2Q; Treasury rate as of June 28
change hands with cap rates in the high-6 percent band.
ice per Unit (000s)

Sources: CoStar$120Group, Inc.; Real Capital Analytics 32%

Year-over-Year

$90 24%

$60 16%
Atlanta
2Q18 – 12-MONTH PERIOD
Employment Trends EMPLOYMENT:
Local Apartment Yield Trends

6.0%
Metro United States
1.8%
Apartment Cap Rate 10-Year Treasury Rate
increase in total employment Y-O-Y
Year-over-Year Change

12%
• Roughly 30,600 positions were added during the first half
4.5%
of the year, contributing to the 48,700 jobs created during
9%
the past 12 months. Hiring cut the unemployment rate 50
3.0%

Rate
6%basis points to 4.0 percent during this time.
1.5% • The trade, transportation and utilities sector led job gains
3%
with the creation of 18,500 jobs. Leisure and hospitality
0% followed with the addition of 11,800 employees.
0%
14 15 16 17 18* 00 02 04 06 08 10 12 14 16 18*

Completions and Absorption CONSTRUCTION:

Sales Trends
Completions Absorption
12,000Salesunits completed
Price Growth
Y-O-Y

Average Price per Unit (000s)

$120 32%
16 • Construction slowed slightly from the 13,000 apartments

Year-over-Year Growth
completed in the prior 12-month 24%
$90 period. Midtown
Units (000s)

12
received the most units among submarkets in the last four
$60 16% into service.
quarters, with roughly 2,100 rentals placed
8

4
• $30
More than 19,600 units are underway8%with completion
dates scheduled through 2020. The largest project is
0 the
$0 550-unit Madison Yards located in0%
Reynoldstown.
14 15 16 17 18* 14 15 16 17 18*

Vacancy Rate Trends VACANCY:

8%
Metro United States 20 basis point decrease in vacancy Y-O-Y

7% • Demand outpaced supply during the year ending in June,

Vacancy Rate

ticking down vacancy 20 basis points to 5.5 percent. In

6% the prior year, vacancy inched up 20 basis points.
• Amid no new completions and steady tenant demand
5%
in Southeast Marietta, vacancy dropped 60 basis points
4%
during the last 12 months to 5.1 percent. Effective rent in
the submarket climbed 5.4 percent during this time.
14 15 16 17 18*

Rent Trends RENTS:

Monthly Rent Y-O-Y Rent Change 5.1% increase in effective rents Y-O-Y
$1,400 12% • Building on last year’s 5.8 percent increase, the average
Year-over-Year Change
Monthly Effective Rent

effective rent climbed 5.1 percent during the year to

$1,150 9%
$1,164 per month in the second quarter.
$900 6% • Above-average rent growth was recorded in many
suburban locations, including those in Decatur. Here, rent
$650 3% jumped 9.4 percent to $1,318 per month. The area has
one of the lowest vacancy rates metrowide.
$400 0%
14 15 16 17 18*

* Forecast
 Multifamily Research | Market Report

DEMOGRAPHIC HIGHLIGHTS

FIVE-YEAR POPULATION GROWTH* 2Q18 POPULATION AGE 20-34 2Q18 MEDIAN HOUSEHOLD INCOME
(Percent of total population)
620,000 Metro 21% Metro $65,155
U.S. Median $61,179
U.S. 21%

1Q18 TOTAL HOUSEHOLDS

FIVE-YEAR HOUSEHOLD GROWTH* POPULATION OF AGE 25+

PERCENT WITH BACHELOR’S DEGREE+**
33% Rent

247,000
Metro 36% 67% Own
U.S. Average 29%
* 2017-2022 **2016

Lowest Vacancy Rates 2Q18 Limited Listings Slow Sales; Heightened

Demand for Class B Assets Elevated Pricing
Y-O-Y
Vacancy Effective Y-O-Y %
Submarket Employment
Rate
Basis PointTrends
Rents Change • Elevated Local
sales Apartment
during the Yield
past Trends
several years are
Change
Metro United States limitingApartment
the number of apartment
Cap Rate assets Rate
10-Year Treasury available
6.0% metrowide, slowing transaction velocity 10 percent
during
12%the year ending in June.
Year-over-Year Change

Far East Atlanta Suburbs 3.2% 10 $966 7.7%

4.5%
SUBMARKET TRENDS

• Heightened
9% demand for limited listings lifted the
Far West Atlanta Suburbs
3.0%
3.9% -50 $973 5.4% average price up 5 percent to $101,900 per apartment
Rate
SALES TRENDS

in the6%
second quarter.
Far North Atlanta Suburbs 4.1% -40 $1,002 7.2%
1.5% Outlook:3%Strong rent growth and tight vacancy in Class
Doraville 4.3% -70 $997 4.7% B assets will sustain investor interest moving forward.
0%
During the
0% past 12 months, increased demand for Class
14 4.4%15 -10 16 $1,318 17 9.4% 18* 00 02 04 06 08 15
10 percent.
12 14 16 18*
Decatur B building lifted property values

South Fulton County 4.4% -120 $855 8.2%

Completions and Absorption Sales Trends
Clarkston/Tucker 4.6% -40 $908 6.0%
Completions Absorption Sales Price Growth
Average Price per Unit (000s)

Henry County 4.6% -10 $1,033 5.9% $120 32%

16
Year-over-Year Growth

Downtown Atlanta 4.8% 30 $1,345 0.2% $90 24%

Units (000s)

12

Northeast Cobb/Woodstock 4.8% -40 $1,175 6.5% $60 16%

8

Northeast Gwinnett County

4 4.8% 40 $1,137 7.1% $30 8%

Overall Metro 0 5.5% -20 $1,164 5.1% $0 0%

14 15 16 17 18* 14 15 16 17 18*

* Trailing 12 months through 2Q18

Pricing trend sources: CoStar Group, Inc.; Real Capital Analytics
Vacancy Rate Trends
Metro United States
8%

7%
Multifamily Research | Market Report

By WILLIAM E. HUGHES, Senior Vice President,

2Q18 Apartment Acquisitions
By Buyer Type Marcus & Millichap Capital Corporation
• Healthy economy and inflationary pressure drive rate in-
Other, 1% Cross-Border, 9%
creases. The Federal Reserve appears committed to normal-
izing the fed funds rate, but further action could be restrained
Equity Fund this year as headwinds could weigh on the economy. Economic

CAPITAL MARKETS
& Institutions, 23%
growth and inflation have had a dramatic effect on the 10-year
Treasury rate, which has more than doubled over the past two
Private, 63% years to 2.85 percent. However, capital inflows as investors
Listed/REITs, 4%
seek alternative investment options are holding the rate below
3 percent.
• Borrowing costs rise, cap rates remain compressed. Debt
Apartment Mortgage Originations providers are facing a rising cost of capital, leading to higher
By Lender lending rates for investors. To compete for loan demand, some
100% lenders may choose to absorb a portion of the cost increas-
es while others will require higher equity stakes up front. More
Percent of Dollar Volume

75% Gov't Agency complex and creative approaches to financing properties may
Financial/Insurance begin to emerge as investors seek to reach return objectives.
Reg'l/Local Bank
50%
Nat'l Bank/Int'l Bank • Lending market remains competitive as interest rates
CMBS rise. Government agencies continue to consume the largest
25% Pvt/Other
share, just slightly over 50 percent, of the apartment lending
market. National and regional banks control approximately a
0%
12 13 14 15 16 17
quarter of the market. Multifamily interest rates currently reside
in the mid-4 percent to mid-5 percent realm with maximum
Include sales $2.5 million and greater
leverage of 75 percent. Portfolio lenders will typically require
Sources: CoStar Group, Inc.; Real Capital Analytics loan-to-value ratios closer to 70 percent with interest rates in
the low-4 percent to low-5 percent span.

National Multi Housing Group

Visit www.MarcusMillichap.com/Multifamily Atlanta Office: Columbus Office:
Michael Fasano First Vice President/Regional Manager Michael Glass First Vice Presid
John Sebree 1100 Abernathy Road N.E., Bldg. 500, Suite 600 5005 Rockside Road, Suite 1100
First Vice President, National Director | National Multi Housing Group Atlanta, GA 30328 Independence, OH 44131
Tel: (312) 327-5417 (678) 808-2700 | michael.fasano@marcusmillichap.com (216) 264-2000 | michael.glass@ma
john.sebree@marcusmillichap.com

Prepared and edited by

Austin Office:
Catherine Zelkowski Dallas Office:
Research Analyst | Research Services
Craig Swanson Regional Manager
9600 North Mopac Expressway, Suite 300 Tim Speck First Vice President/D
For information on national apartment trends, contact: 5001 Spring Valley Road, Suite 100
Austin, TX 78759
John Chang (512) 338-7800 | craig.swanson@marcusmillichap.com Dallas, TX 75244
Senior Vice President, National Director | Research Services (972) 755-5200 | tim.speck@marcu
Tel: (602) 707-9700 Baltimore Office:
john.chang@marcusmillichap.com
Fort Worth Office:
Matthew Drane Regional Manager
100 E. Pratt St., Suite 2114 Kyle Palmer Vice President/Reg
Price: $250 Baltimore, MD 21202 300 Throckmorton Street, Suite 150
Tel: (443) 703-5000 | bryn.merrey@marcusmillichap.com (817) 932-6100 | kyle.palmer@marc
© Marcus & Millichap 2018 | www.MarcusMillichap.com
Boston Office:
Denver Office:
Tim Thompson Regional Manager
100 High Street, Suite 1025 Robert Kaplan Vice President/R
Boston, MA 02110
The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete1225 17th Street,
information; Suite no
however, 1800
representation, warranty or guarantee, express or implied, may be made as to the (617) 896-7200
accuracy | tim.thompson@marcusmillichap.com
or reliability Denver,
of the information contained herein. Note: CO 80202
Metro-level employment
growth is calculated based on the last month of the quarter/year. Sales data includes transactions Office:
valued at $1,000,000 and greater unless otherwise (303) 328-2000
noted. | robert.kaplan@ma
This is not intend-
Charleston
ed to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered
as investment advice.
Benjamin Yelm Regional Manager Detroit Office:
Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar 151Group,
Meeting Inc.; Experian;
Street, Suite National
450 Association of Realtors; Moody’s Analytics; Real Capital
Analytics; RealPage, Inc.; TWR/Dodge Pipeline; U.S. Census Bureau
Charleston, SC 29401 Steven Chaben Senior Vice Pres
(843) 952-2222 | benjamin.yelm@marcusmillichap.com Two Towne Square, Suite 450
Southfield, MI 48076
Charlotte Office: (248) 415-2600 | steven.chaben@ma