What Makes Atlanta a Top Market for Real Estate Investment?

What Makes Atlanta a Top Market for Real Estate Investment?
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Atlanta is bursting at the seams with historical significance. For instance, the city was nearly burned down by Gen. Tecumseh Sherman during the Civil War. And later, it emerged as a hotbed of the Civil Rights Movement, serving as the birthplace of Dr. Martin Luther King. These events have left an indelible mark on the city of Atlanta and earned it everlasting esteem among major US metros.

These days, however, Atlanta is starting to be known in the business community as the “Silicon Peach”, thanks to its high concentration of information technology jobs. And, as it famously boasts the world’s busiest airport and is known as one of the nation’s largest hubs for higher education, Atlanta has begun maturing into a modern city of commerce and influence.

If you’re a real estate investor, you should be excited about Atlanta’s potential. In this article we’ll look at how the city’s powerful economy has impacted its housing market, and how those factors together help make Atlanta a top market  for real estate investment.

An economic powerhouse

Atlanta’s economy is the tenth-largest in the U.S. and ranks in the top 20 worldwide, with an annual GDP clocking in at an impressive $385 billion. Its economic strength rests on strong pillars, and it’s laying the foundation for incredible expansion over the coming years.

Big players in a big pond

Atlanta is home to many Fortune 500 companies, including household names such as Coca-Cola, Turner Broadcasting, Delta Airlines, UPS, and Home Depot.

Its diverse economy includes the aerospace, logistics, professional and business services, transportation, information technology, and medical services industries among others.

Tourism also generates significant revenue for the city, with an estimated 51 million visitors to the metro in 2016. Attractions include four major professional sports teams, historical sites from the Civil War and Civil Rights Movement, the world’s largest indoor aquarium (The Georgia Aquarium), and popular art and music festivals such as the Atlanta Film Festival and Music Midtown.

Job growth

Workers are drawn to Atlanta because of its impressive job gains, outpacing the national average, which indicates an expanding economy.

In Yardi Matrix’s Atlanta’s In For The Long Haul Multifamily Report Summer 2019, the authors note that, “the metro gained 60,300 jobs in the 12 months ending in March, up 2.1% year-over-year, compared to the 1.6% national rate.”

Not only is job growth outpacing the national rate, workforce participation is high, helping to create a “landlord’s market”. Yardi adds, “Sustained employment growth has kept the unemployment rate at 3.8% as of February, and has continued to generate demand for more multifamily product in Atlanta.”

Life sciences leading the charge into the next phase

With a look to the future, expansion in the life sciences industry will bolster Atlanta’s economy, with investment capital pouring in at a rapid pace. As Yardi puts it, “Atlanta is poised to become a hub for pharmaceutical and biotech companies moving or expanding in the South.”

One high-profile project Yardi highlights is Emory University’s $1.5 billion hospital campus and its plans to develop a new health innovation district.

On the workforce front, trained workers are set for delivery. Yardi mentions. “Atlanta had more than 2,000 bioscience and biomedical graduates between 2016 and 2017, making the metro the 10th largest market for life sciences talent, according to CBRE.”

Educated talent pool

One of the reasons so many high-profile companies set up in Atlanta is because it’s a hotbed for educated workers.

According to Wikipedia, Atlanta is home to over 20 universities and colleges, including the Georgia Institute of Technology, which frequently ranks in the top ten public universities in the United States. On the private side, it has notable colleges such as Emory University, often considered a top 25 university in the country.

Thanks to the colleges in Atlanta, its local companies can find qualified labor. And with top-quality technology and research institutions, this is not a market nor workforce to be left behind by new tech or other innovations.

Impacted housing market

Now that we’ve explored the might of Atlanta’s economy, let’s look at how population growth, rent growth, and development figures come together to present an ideal market for real estate investment.

Explosive population growth

In Yardi’s report, they noted that Atlanta’s strong economic performance and continued job growth are bringing people to the area at an impressive rate.

According to Yardi, “The metro gained 89,013 residents in 2017, up 1.5% year-over-year, more than double the 0.7% U.S. average.”

As population gains tend to drive up housing demand and increase rental values, this is good news for investors.

Rent growth

Renters are, in fact, feeling the pinch in Atlanta, with rates rising higher than the national average.

Yardi says that, “rents in the metro rose 4.8% year-over-year through April, 180 basis points higher than the 3.0% national rate of growth through that interval.”

And this trend doesn’t look like it’s slowing down. Yardi adds, “The average occupancy rate in stabilized properties increased by 20 basis points year-over-year as of March to 94.3%, signaling that rental demand remains strong.”

Even with rents growing at a fast pace, they haven’t hit their ceiling. Yardi points out that, while many residents are battling cost-of-living issues, “Atlanta ranks as one of the most affordable metros, due to its low average rent, especially compared to major coastal markets.” They go on to say, “The relative affordability of the market indicates that there are further opportunities for rent growth.”

Steady development

The population gains are creating an opportunity for new development.

In an interview with Multi-Housing News, Tom Underwood of Hoar Construction extols Atlanta’s exponential population growth and goes on to explain, “The key demographic moving to Atlanta is young professionals, between 18 and 34, which is also the prime renter cohort. This impressive growth is the fuel for additional multifamily development.”

But the question for investors is this: Will additional housing come online to ease demand and chip away at rent growth?

It doesn’t look like it.

In the same interview Tom Underwood says, “When compared to other large markets, Atlanta has not been overbuilding in the multifamily segment, which has helped keep vacancy rates low and rent growth elevated on a relative basis.”

Sturdy Atlanta keeps on growing

Though once nearly destroyed in the wake of a nation at war, Atlanta regrouped, rebuilt, and has matured into a leading southern city. A bronze statue called “Atlanta from the Ashes,” in which a woman is lifted from flames by a Phoenix, is a city symbol that celebrates its resurgence into a global city.

An economic powerhouse and cornerstone center for higher education, Atlanta’s population and rent growth, not to be offset by development, demonstrate all the pieces are in place for this former railroad town to ride into a prosperous future.

We’re on board.

At Birchstone Investments, we frequently review investment opportunities in the Atlanta multifamily real estate market. If you’re interested in learning more about commercial real estate investment opportunities in Georgia or another area of the Southeastern United States, join the Birchstone investor community today.

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Jerry Hollifield

Jerry Hollifield

Jerry is the Managing Principal & Chief Investment Officer at Birchstone Investments, LLC. With a business career that spans more than 30 years, he has been involved in the acquisition, development, financing and management of over $400 million in real estate. In addition, he has been involved in more than 40 Merger and Acquisition transactions with total value exceeding $600 million.

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