Atlanta Apartment Rent Growth Slows as Completions Begin to Outpace Demand

(April 5, 2001) — Atlanta’s apartment leasing environment is growing more competitive, evidenced especially by the increasing use of rental concessions in the marketplace and a notable slowdown in effective rent growth.

With additional rent special signs popping up across the metro, effective rates for new leases rose just 2.8 percent during the year-ending 1st quarter, according to the latest edition of M/PF Research’s Atlanta Apartment Report. Previously, annual rent growth had hovered between 4 and 5 percent from late 1998 through early 2000, before trending downward in recent months. Furthermore, for the first time in several years, Atlanta rent growth now falls markedly below the metro’s overall consumer price inflation rate, reported by the Bureau of Labor Statistics at a significant 4.7 percent as of February.

The M/PF Research survey measures rent change on a same-store basis, comparing rates for individual properties in March 2001 with the rents those same projects generated in March 2000. Thus, sample variation does not impact the calculations.

“With a notable slowdown registering in Atlanta’s economy during late 2000 and early 2001, the metro is seeing fewer new household formations and thus less total demand for housing,” said Greg Willett, M/PF Research’s director of research products. “Deliveries of new apartments remain quite substantial, however, forcing property owners and managers to sacrifice rent achievement in order to lease new projects and retain the residents at existing communities.”

Monthly rents in metropolitan Atlanta currently average $808 overall and $915 at properties built during the past decade.

Demand for apartments totaled 1,270 units in the January-March time frame, bringing Atlanta’s product absorption volume for the year-ending 1st quarter to 13,250 units. In comparison, properties totaling 14,214 apartments were completed during the past 12 months, including 2,383 units in projects finished during 1st quarter.

Metro Atlanta’s apartment occupancy rate now stands at 95.5 percent. That figure essentially mirrors early 2000 occupancy of 95.6 percent but slips well under the 96.9 percent occupancy rate posted in 2000’s 3rd quarter.

A few neighborhoods recently took notable hits in apartment occupancy. Occupancy slipped about 3 points from the early to mid-2000 peak in the South Atlanta/South Fulton County area, while occupancy declined by roughly 2 points across Gwinnett County and in East Cobb County. However, occupancy continues to surpass 96 percent in a few neighborhoods, including Northwest Atlanta, West Cobb County, East DeKalb County and Clayton County.

“Atlanta’s apartment leasing environment appears likely to grow even more competitive in the near term because of the large volume of ongoing construction,” according to M/PF’s Willett. “The 20-county metro contains the nation’s largest block of future product in the pipeline, with ongoing building at the end of 1st quarter totaling more than 18,000 apartments.”

M/PF’s Atlanta Apartment Report is a quarterly report that includes data and analysis addressing the local economy and trends in apartment demand, supply, occupancy and rents. Information is summarized on the metro level and detailed for 14 submarkets.

Founded in 1961, M/PF Research is the trusted national expert in apartment market research, each quarter conducting primary research on property performance in more than 50 U.S. metropolitan markets. M/PF is retained by investors, developers, owners and lenders to prepare project-specific market studies and to produce broader, strategic market selection analyses and reports. M/PF Research, located in Carrollton, Texas, is a wholly owned subsidiary of RealPage, Inc., a leading provider of property management software and web services.