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Atlanta Multifamily Market Signals RecoveryBy: Jennifer LeClaire
Atlanta's multifamily market is showing signs of recovery. So says Marcus & Millichap's third quarter ApartmentResearch Market Update.
Although the market may look worse before it looks better, renewed job creation and new household formations will continue to stabilize the Atlanta apartment market and set the stage for steady improvement in fundamentals in 2011, Marcus & Millichap reports.
"Concessions seem to be slowly burning off," Andrew Mays, vice president of Investments and director of the National Multi Housing Group at Marcus & Millichap, tells GlobeSt.com. "I'd say it will be another 18 months before the majority of the concessions are gone. We expect a slow improvement."
Nearly 5,000 apartments will come online in 2010. That's fewer than last year, when 6,800 apartments were introduced to an overcrowded market. Construction will slow further in 2011, with only 1,400 units are currently slated for delivery.
In 2010, vacancy will decline 20 basis points to 12% as easing job growth in the second half slows the momentum set in the first part of the year. By comparison, vacancy rose 140 basis points in 2009.
The good news is marketwide vacancy declined for the second straight quarter on continuing strong demand for Class A units. Vacancy rates inched down 10 basis points to 11% in the third quarter.
Asking rents will decrease 1% in 2010 to $815 per month, following a drop of 4% in 2009. The rate of decline in effective rents also will wane, with $730 per month expected. Effective rents fell 4% last year.
Braden Fellman Group, an Atlanta-based multifamily housing owner/operator, holds 1,100 units in Atlanta's niche markets. Braden Fellman President Preston Snyder tells GlobeSt.com he is guardedly optimistic that Atlanta has passed through the worst of the multifamily hangover. But renting apartments in Atlanta still isn't easy.
"You fight for every deal," Snyder says. "It's so competitive. To get an apartment deal now seems harder than selling a house. Consumers are shopping around and they are taking their time to decide which apartment they are going to rent."
Despite signs of an economic recovery gradually taking hold, transaction velocity declined 24% in the past 12 months. Sales of large, institutional-grade properties of 200 or more units accounted for about 40% of all deals during the period, in line with historical trends.
Marcus & Millichap expects institutional investors to keep looking to Atlanta, where a large stock of top-quality assets provides an outlet for capital. The firm said properties in the metropolitan core will see the greatest investor attention due to relatively consistent renter demand. However, capital challenges remain.
"We've closed eight deals this year, and only one was in the first quarter," Mays says. "So things are picking up. We've seen a handful of hybrid hard money deals get done. But the majority of transactions right now are on the distressed side with seller financing or cash. There's definitely a lack of additional funding."
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