Investors are "swarming" Atlanta's multifamily market, driving pricing up

Atlanta is a hot spot for investing in multifamily assets as the market emerges from the COVID-19 pandemic. The apartment market's fundamentals, including occupancy and rent growth, have held up considerable well, making the market extremely attractive to buyers.

Because the Atlanta market has an abundance of capital looking to be deployed, prices are being driven up significantly and cap rates driven down. Multifamily has outperformed many other commercial real estate sectors during the pandemic, considered a "hot-ticket asset class" by investors, which leads to new capital swarming the Atlanta market.

Many multifamily properties are now routinely trading at a sub-4 percent cap rate, indicative of the vast amount of available capital and the confidence that investors have in the product type.

However, rather than clearing the market and searching for as many prospective buyers as they can, sellers are looking at a smaller subset of dominant, well-known investors that they know will deliver and get the transaction done. They are seeking six to 12 well-recognised, established players that can execute a deal at top prices. It is an extremely competitive process, and all buyers know they have to swing high on pricing. Oftentimes, no one broker is selected for these listings, but brokers may be asked for names of several prominent players and become somewhat of a "match-making" service. The transaction may still go through a round or two of price adjustments, but the market is convinced that everyone recognises if they are purchasing today, they have to pay top dollar. That trend is leading to a record number of off-market deals trading.

Check out the whole story, including coverage of topics such as: Full price for pre-stab product; Bridge lending heating up; COVID-19's impact, Built-to-Rent growing; and a 2021 Outlook.