Cautious Optimism for Atlanta’s Apartment Market, despite High Unemployment

Atlanta--The Atlanta market appears to have bottomed out, and many in the metro area are cautiously optimistic that better days are ahead.

Atlanta—The Atlanta market appears to have bottomed out, and many in the metro area are cautiously optimistic that better days are ahead, says Debra Millwood, the newly appointed president and chief operating officer of Wilkinson Real Estate Advisors, which owns and manages 7,000 units throughout the Southeast.

Marcus & Millichap is predicting a vacancy decline of 150 bps in 2011, to a market-wide average of 8.8 percent. Class B and C vacancy rate, meanwhile, is projected to decline 140 bps, to 11.1 percent.

According to Marcus & Millichap’s latest report, about 1,000 units are slated for delivery this year, which is relatively low compared with 4,900 units in 2010 and the five-year average completion of 5,700 units annually.

Average asking rents are expected to increase 2.5 percent on average. Class A assets will see a 3.4 percent increase, while Class B C asking rents will advance 1.4 percent. Effective rents, meanwhile, will increase 3.1 percent as concessions slowly burn off.

“In general, Atlanta is very location-driven,” Millwood tells MHN. “It’s not one general apartment market; [fundamentals] really differ from neighborhood to neighborhood.”

She adds that Atlanta has been somewhat slower to come back than other Southeastern markets in which Wilkinson has assets. “Atlanta is a little behind because of a large market and lack of job growth.”

Atlanta’s unemployment rate was 10.4 percent as of January 2011, the highest it’s been since March of 2010, according to the U.S. Bureau of Labor Statistics.

The transaction market is mostly comprised of lender-owned properties (accounting for more than 75 percent of Atlanta-area deals last year), according to Marcus & Millichap. This year, however, stabilized complexes will draw some interest. Cap rates are expected to range from 8 percent to 9 percent, with Class A assets trading at less than 6 percent.

Overall, Millwood is optimistic about Atlanta’s relative stability. “I think Atlanta’s economy is diverse enough that there’s not anything that would take us in one swing up or down dramatically,” she notes.