The Atlanta MSA offers an interesting story of economic recovery. As one of the harder-hit areas during the Great Recession and its financial aftermath, the MSA's average effective rental growth rate declined by -9.1% in 2009, while occupancy averaged 89.5%. Job loss was severe that year at -5.3%, while the unemployment rate stood at 9.7% (though the unemployment rate would rise above 10% in the following year, 2010).
Coinciding with these poor job numbers, new apartment supply fell well below the historical level. However, during 2009, a total of 5,027 new units came online, the result of many groundbreakings in 2007-2008. In stark contrast, absorption was 2,917 units, leaving a glut of vacant inventory. This is why, in 2010, new units delivered to market dropped to 955.
Then the relationship between supply and demand changed. Between 1Q11 and 4Q12, 2,765 units were delivered to market. Meanwhile, unit absorption during the same period was 9,760 units. As such, in the aftermath of the Great Recession, much of the inventory glut created in 2009 has disappeared, while apartment demand has increased.
The MSA's population is growing; the U.S. Census Bureau's 2012 population estimate of the city of Atlanta alone is 443,775, a 5.6% increase from the 420,003 reported in 2010. Fulton County, of which Atlanta is the county seat, had a 2012 estimated population of 977,773, a 6.2% increase from the 920,583 reported in 2010.
Employment and Jobs
In addition to population growth, the Atlanta MSA is experiencing positive job growth as well. According to the Bureau of Labor Statistics, as of October 2013, not seasonally adjusted employment in the Atlanta MSA stood at 2,434.4 million, an increase of 63,300 jobs or a 2.6% growth from the previous year. This figure is above the year-over-year national average of 1.7%. Of note: Construction employment in the MSA increased by 9.2%, while government employment decreased by 1.3%.
When it comes to unemployment, the metro’s overall rate was 7.7% as of October 2013 down from 8.5% reported during this month a year ago. This is still an increase from the year's low (so far) of 7.4%, recorded during September 2013. Atlanta's current unemployment rate is above the U.S. national average of 7.3%.
And from a multihousing perspective, the Atlanta MSA’s new supply is starting to catch up with demand. Though unemployment is higher than the national average, the MSA is experiencing moderate employment growth, which generally paves the way toward greater apartment demand.
The Apartment Market
Occupancy as of October 2013 was 93.7%, a slight increase of 0.9% year over year and an increase of 0.7% from 2Q13. The forecast is for occupancy to remain relatively flat.
We are forecasting occupancy to average 93.1% during 2013 but increase to 94.6% by 2014. The new supply is also expected to increase during 2014. This will reach the long-term historical average, but remain manageable as job and population growth is expected to help absorb those new units.
Effective Rent Growth
The Atlanta MSA is experiencing strong effective rent growth. The 5.3% annual effective rent growth reported in October 2013 outpaces the national average of 3.0%. Additionally, it's above the 3.0% reported in October 2012.
With economic fundamentals strengthening and household formation increasing, demand for housing remains strong. With absorption expected to exceed supply strongly in 2014, effective rent growth and occupancy are estimated to stay strong until 2015 when supply is expected to exceed demand, slowing down effective rent growth.