Omar Arroyo of 3-Men Movers closes his truck after moving in a new resident from Round Rock into Westdale Creek Apartments in Austin in March. Though the Texas House and Senate’s spending plans disagree on the final amount, “more important is the fact that both chambers have constructed budgets that at least on paper keep spending increases to less than population growth plus inflation,” write Bill Peacock and Vance Ginn of the Texas Public Policy Foundation.
Photo: Jay Janner/Special to the American-Statesman
Photo: Jay Janner/Special to the American-Statesman

Atlanta rents flattening out: are they going to drop?

A burst of building has brought the Atlanta rental market to a tipping point, possibly tilting rents lower in the next few months, according to analysis by a national apartment data firm.

About 12,000 units are being added this year, up 29 percent from last year and 45 percent higher than during 2015, and most of them are in just a few areas, according to Apartmentdata.com

“It is kind of a wait and see,” said Bruce McClenny, president of the Houston-based company. “But from the renters’ perspective, this is a little bit of a breather and a chance to make deals.”

Rents for some two-bedroom apartments in North Fulton’s Avalon development top $5,000 a month. That puts the suburban apartments on par with rents for top units in Midtown Atlanta and Buckhead. (Video by Matt Kempner and Erica A. Hernandez/AJC)

Of course, from the owners’ side of things, it looks a bit different. 

The over-supply of apartments has meant some discounts and promotions and that trend is threatening to pick up. More than 80 percent of the 15,000 units now under construction are in a handful of places, McClenny said. 

Getting the lion’s share of construction are Buckhead, Midtown, downtown, the Sandy Springs and Perimeter area, as well as the Cumberland and Vinings area, he said. “With the building concentrated, these are markets that will be under the most stress.”

Job growth and a flow of new residents to Atlanta the past several years have been keeping most of the new units filled. But the increasing demand for apartments seems to have slowed, according to ApartmentData.com.

During 2015, renters filled an additional 12,000 units. Last year, they occupied an additional 8,000 units.

“Atlanta has had the good fortune e to keep adding units while occupancy held, but now things are flattening at the top of the market,” McClenny said. “That puts pressure on other Class A properties.”

New construction is typically designated as Class A. Rents in that category are currently averaging $1,589 a month, compared to the overall average of $1,079, according to ApartmentData. 

And since August, Class A has seen rents slip 1.3 percent, McClenny said. 

If job growth slows, that could tip the balance against owners. And in the hotter areas where most of the construction is being done, the balance is already threatening to swing in the renters’ direction. 

“Most leases are done between April and September,” he said. “So the next five months will tell.”

If apartment rents decline, that won’t have an immediate impact on the housing market, but it will undercut some of the urgency that renters might feel to buy a home. 

Sub Market   ..... Trend since Augus

 Buckhead                                -2.6%

Midtown                                    -4.4%

Downtown                                -3.5%

Brookhaven                               Flat

Sandy Springs/Perimeter     Flat

Lindbergh                                  -3.0%

Cumberland                               0.6%

Source: ApartmentData.com

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