What are the overall trends you see playing out in the Atlanta multifamily market so far this year?
It feels like Groundhog Day – still tremendous capital inflows from private and offshore capital with new investors entering the market seemingly weekly. Capital inflows, combined with very health fundamentals have put Atlanta in the spotlight in 2019.
I’ve seen recent reports pegging rent growth in Atlanta as much higher than the national average. What is driving that growth? How much room for growth is left in Atlanta before renters and investors/developers get priced out…etc?
We are benefiting from strong job growth and, uniquely to this cycle, we are seeing much of this growth in the higher-paying professional job sectors. That has driven continued demand for urban product, as those jobs have largely been concentrated in the urban sub-markets.
However, the urban sub-markets have also seen the highest number of units delivered and higher-density product has become increasingly expensive. 2019 marked a big change with construction starts moving to the suburbs in favor of the urban core. These investment flows suggest there is more runway for rent growth in the suburbs, but the urban core is performing better than many projected.
What are some areas in Atlanta or Metro Atlanta where there remain a lot of opportunities for multifamily development, redevelopment and value-add investment?
Increasing costs for land, labor and construction inputs are all stressing the underwriting for developers and value-add operators. The opportunities require creativity in design and site selection. We are seeing opportunities across the region, but the “down the fairway” deals are few and far between.
Have you seen any affect from the recent interest rate cut on the ATL multifamily market? How do you see the market being affected?
There was maybe a week or two of uncertainty with the dramatic move in the bond market, but the overall cost of borrowing is down. The Agencies are trying to pump the breaks, but by October, we will be borrowing on 2020 allocations. Overall, the lower cost of borrowing has created further cap rate compression.