The good news is that apartments are filling up again as permits for new multifamily communities continue to decline. They are declining because potential tenants are buying homes in suburban areas at record-low interest rates instead of renting, suggests Erik Pawloski, research director at locally based Bullock Mannelly Partners Inc.
The bad news for property owners, however, is that concessions continue to rise as existing properties struggle to retain tenants, Pawloski says. Class A properties are reporting the highest concessions at about $137 per unit. Class B properties are allowing $122 per unit; class C, $86 per unit. Average monthly rents are $951 for class A; $814 for class B; and $724 for class C.
"Average quoted apartment rents in the Atlanta area dropped during 2003 after increasing for the previous six years," Pawloski says. The Buckhead and Midtown submarkets share the highest asking rents at $1.04 per sf, compared to the lowest asking rents of Southwest DeKalb and Southwest Fulton at 65 cents per sf. Buckhead improved its vacancy level by 1.5% to 6.8%, going from 8.3% at year end 2002.
"In response to low interest rates and previous years of over-building, apartment construction continues to lose momentum," the Bullock Mannelly researcher says. For example, total starts decreased to 7,592 units for 2003, down from 9,702 units in 2002. Total year-end deliveries are down 30% from a year ago.
"Both are positive indicators that the apartment supply is justly reacting to the dormant demand," Pawloski says. Another positive observation is units delivered are greater than unit starts. "In fact, deliveries have outpaced starts over the past four years, demonstrating that the pipeline inventory is gradually being reduced," he says.
Besides a lower volume of new starts, also helping the multifamily sector is the number of projects initially planned as apartments now being converted to condominium units, "thus reducing delivered apartment units," says Pawloski.
He concludes that Atlanta's apartment market "continues to expand at a controlled pace.
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