After an unprecedented high-rise apartment boom, Atlanta is poised for a slowdown in new projects and a return to a renters’ market.
Several trends are merging to slow both construction and rent growth.
First, construction was started on 6,500 high-rise units in Buckhead and Midtown between 2015 an 2017, according to the Reid Report, a publication that tracks apartment development across the region. That is a historic level of apartment towers in the city’s development pipeline. Another 4,500 high-rise units remain under construction, according to real estate consulting firm Haddow & Co. It’s going to take some time for those apartments to fill up.
In fact, Atlanta didn’t have a high-rise rental market until this real estate cycle. Before that, almost all new residential towers were built as condominiums.
Another reason for the projected slowdown in apartment high-rises is the cost to develop them. Construction costs have soared more than 30 percent since 2010, when the first wave of projects started to form, according to market data.
And, now rents are struggling to keep pace with those costs. In fact, for some towers that opened between 2012-2015, effective rents are down as much as 10 percent, according to Haddow & Co.
Concessions are also being closely watched. In Buckhead, landlords are offering tenants up to two months of free rent if they will sign new leases, according to the Reid Report.
The fundamentals suggest next year Buckhead and Midtown may see the fewest number of new towers start construction since 2014.
“We are expecting a dramatic decline,” said Harvey Wadsworth, a development executive with Mill Creek Residential, which has a new high-rise under construction on Peachtree Road next to ritzy mixed-use development The Shops Buckhead Atlanta.
Apartment deliveries, or new units that come onto the market, is peaking in Midtown now and peaked in Buckhead two years ago, according to Mill Creek.
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