The growing number of Americans opting to rent instead of buy a home is helping spur a resurgence of apartment construction across the country and in metro Atlanta, where builders expect to break ground on thousands of new units this year.
In the wake of the housing bust, homeownership rates have tumbled. Metro Atlanta’s fell to a six-year low of just under 65 percent in 2011 — a trend developers are betting will fuel demand for apartments in coming years.
That rebound in apartment construction could be a bright spot in Georgia’s devastated construction industry, which lost 90,000 jobs since its peak in 2007.
The foreclosure crisis has thrown thousands of former homeowners into the rental market. Others rent because they don’t want to buy while home prices are still falling, or they fear losing a job or they can’t qualify for a mortgage. Young, urban professionals who don’t want to tie themselves to a house like the flexibility renting offers.
All of which helps explain why builders plan to start work this year on roughly 7,400 new apartment units in metro Atlanta — up from a low of 1,684 units in 2009, according to data from the Reid Report, which tracks the metro Atlanta apartment market.
“You have a whole psychological shift in this country,” said George Reid, author of The Reid Report.
With financing still difficult to obtain, however, it’s unclear whether all of the proposed units will get built. So apartment builders are still cautious. A big rush of construction, after all, is unlikely with tight financing, unemployment still high and the influx of new residents slowed, industry observers say.
“This is not a runaway market,” said Alan Wexler, president of Databank Atlanta, a real estate tracking firm.
Projects currently under way — including a new 23-story apartment tower in Midtown called SkyHouse — will begin to open in the next 12 to 24 months, Wexler said.
The $60 million, 320-unit SkyHouse Midtown started taking shape in recent months at 12th and West Peachtree streets.
Its target market is young professionals who want to live in diverse, urban neighborhoods and stay mobile, said Mark Stewart, director of investments for Batson-Cook Development Co., which is partnering with Novare Group on the project.
“For many Americans, owning a home became an anchor, not only on their bank accounts but it limited their mobility,” Stewart said.
Many of the other new projects in Atlanta are high-end and in urban areas such as Midtown, Buckhead and Perimeter.
Daniel Corp. and Selig Enterprises are teaming up on a second, 22-story apartment tower in Midtown. Daniel also plans to invest more than $50 million buying and expanding an 80-unit luxury apartment building in west Buckhead.
Houston-based developer Hines, better known for its office towers in Atlanta, is launching its first apartment project here: a 215-unit complex at Dresden Drive and Peachtree Road in Brookhaven.
Developers started 4,100 new apartment units last year, more than half of them inside the Perimeter where rents have bounced back three times faster than the suburbs, Reid said.
“That’s where people want to live,” he said.
Atlanta-based Post Properties, which opened its last new apartment project here in 2008, isn’t currently building in metro Atlanta, though it’s evaluating land it owns to potentially build again, said Jamie Teabo, executive vice president at Post.
Post has five projects under way in other metro regions. It began building again first in the Washington D.C. region, which weathered the downturn better than other metros, Teabo said. Places like Austin and Houston have seen a lot of job growth compared with Atlanta, she said.
Atlanta rents are strong and Post’s existing properties here have seen good occupancy rates, she added.
Jim Dewberry has seen his rent at Post Renaissance near downtown rise about $400 since moving there four years ago.
After changing jobs in January, Dewberry, who builds websites, is again on the hunt for a place closer to his new work. Dewberry recently put a bid on a house in Atlanta’s Morningside neighborhood that would make his mortgage payment $400 less than his current rent.
If that falls through, he said he’ll look for an apartment with a shorter lease.
He’s reluctant to become a homeowner unless the deal is good and the location would allow him to sell if he needed to.
“The houses that I see have been on the market forever,” he said. “I just don’t want to get stuck in that.”
RENTAL RATES
The upturn in construction won’t likely have a huge effect on rents, says Theron Patrick, an analyst at Texas-based ALN Apartment Data. Average effective* rents in metro Atlanta have held steady since 2006:
• December 2011: $777
• December 2010: $756
• December 2009: $747
• December 2008: $799
• December 2007: $805
• December 2006: $775
*Takes into account specials and discounts such as one month of free rent
UNITS PER YEAR
Since 2007, the number of new apartment units started by builders has tumbled, though construction has been bouncing back:
• 2007: 11,060
• 2008: 6,338
• 2009: 1,684
• 2010: 1,725
• 2011: 4,100
• 2012: 7,400 (projected)
Sources: The Reid Report and ALN Apartment Data
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