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Renters Seeking Affordability Put Pressure on Atlanta’s Middle-Class Suburbs

CoStar Market Insights: Rent Growth Heating Up Outside City Core
October 5, 2018
The 298-unit Arbor Place apartment complex in Douglas County.

Atlanta's multifamily complexes have been the beneficiary of renters' renewed interest in the metropolitan area's urban cores.

However, as new, high-end supply has rocketed higher in the inner submarkets, renters have fled to Atlanta’s vast suburbs in search of rent relief. But that relief may prove to be short lived as rent growth has taken off with this new-found demand. Rent growth for Atlanta is the fourth-fastest in the nation among major metropolitan areas, however this is disproportionately driven by more-affordable suburban locales.

Of submarkets with at least 5,000 units, Atlanta has two currently in the top 10 for rent growth, five in the top 30 and a full 10 percent of the top 100 submarkets. Led by Douglas County, which initiated zoning designed to restrict apartment construction, rent growth was a staggering 9.5 percent as of late 2018.

Both East and South DeKalb are in the top 50 nationally, as are fellow eastside submarkets, Henry County and Outlying Gwinnett County. Even Atlanta’s largest submarket, Cumberland/Galleria, in suburban south Cobb, cracks the top 100 nationally, with rent growth above 5 percent in nearly 50,000 units.

Pulling down rent growth in Atlanta are supply-heavy submarkets such as Buckhead and Sandy Springs/Dunwoody, which both have seen rents expand by less than 3 percent this year. Even the Downtown/Midtown submarket, which led the metropolitan area in positive absorption this year at over 3,000 units, will see rents rise by less than 4 percent.

Downtown/Midtown is a prime example of a supply wave putting landlords in a weaker position to raise rents, even in well-located areas with access to good jobs and social amenities. That submarket saw supply expand by more than 6 percent on a trailing 12-month basis. Indeed, the average supply addition for the area’s slow-growing, large submarkets was nearly 3.5 percent, compared to 0.5 percent for the submarkets with above-average rent growth.

The in-town submarket supply wave is not close to being finished, either. Downtown/Midtown has another 13 percent under construction, while the Buckhead submarket will grow by 8 percent.

Another aspect that has driven rent growth is affordability. Atlanta’s top-three fastest growing large submarkets have average rents below $1,000 per unit. Clayton County, with the seventh-fastest growing rents in the nation, offers a typical unit for just $868 per month. Conversely, the large submarkets with rent growth slower than the metro average offer average rents at more than $1,450 per month.

Nationally, rent growth is dominated by Sunbelt states. The top 10 major metropolitan areas (with at least 100,000 units) all hail from Nevada, Arizona, Florida, Georgia and Southern California. The first non-Sunbelt entry is Denver, Colorado, in 12th place. Interestingly, the top four were all major housing bust markets: Las Vegas, Phoenix, Orlando and Atlanta.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

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