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.”
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 August
Sandy Springs/Perimeter Flat
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