AMLI Residential is breaking ground next quarter on its third project in the tony Buckhead market. But while other developers continue to have designs on new projects in Atlanta, costs and tougher financing may make those dreams more elusive in 2018.
AMLI has filed permits with the City of Atlanta to move forward on its 391-unit project that includes a 24-story high-rise along with a five-story mid-rise. The project is wrapped by a parking deck off of Lakeside Drive and faces Marie Sims Park.
The $129M Class-A project, called AMLI Oak Valley, will offer one- to three-bedroom units and will include an assortment of luxury accoutrements, including 10-foot-high ceilings, quartz countertops and floor-to-ceiling windows with views of either the park or the Buckhead skyline, AMLI Vice President Annie Evans said.
Amenities include an elevated pool, gardens, outdoor deck grilling and dining, outdoor fitness center and a fitness studio. The project is expected to deliver by the last quarter of 2019.
This represents a hat-trick development in Buckhead for AMLI, which includes AMLI 3464 and AMLI Buckhead. And it is part of a continued pipeline of potential new apartment projects in Metro Atlanta at a time when some 10,000 units are under construction, according to a recent Haddow & Co. report. Among the potential projects:
Kaplan Residential's $80M, 336-unit Generation Atlanta apartment project off Centennial Olympic Park Drive.
The $80M-plus Post Centennial apartments, overlooking Centennial Olympic Park in Downtown Atlanta.
Wood Partners' Piedmont House, a nearly 200-unit project overlooking Piedmont Park off 12th Street.
Lennar Multifamily Communities' Vireo, a 26-story, 310-unit high-rise apartment tower at 195 13th St.
SJ Collins Enterprises' $245M, 673K SF mixed-use apartment project at Howell Mill Road and 14th Street in Midtown that will include a five-story, 342-unit apartment building, as well as a boutique hotel, office and retail space.
But 2018 may not be as robust a year for apartment developers as in the past two years.
“Multifamily development capital remains available, [but it is] cautious, picky,” Patterson Real Estate Advisors founder Lance Patterson said.
Patterson said the quality of the sponsorship, which is industry-speak for how well-capitalized and how good of a track record a developer has, will be the big factor in determining if a project gets funding.
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“I think the costs are going to be the biggest governor on what deals make it through and which don't,” Haddow & Co. Vice President Ladson Haddow said.
A confluence of factors may restrain new apartment supply in Atlanta in 2018: rising construction costs, inflated land prices and the expectation that the Federal Reserve will continue to hike interest rates next year, making borrowing costs all the more expensive. Developers have to be able to achieve rents well above $2/SF to justify the costs.
AMLI is expecting rents to be $2.55/SF at AMLI Oak Valley, well above Buckhead's average of nearly $2/SF.
Both Haddow and Patterson said the industry is not expecting today's rents to rise much further in 2018.
“Everyone underwrites using today's rents, no trending,” Patterson said.
That said, there is still plenty of capital wanting to invest in multifamily.
“People are looking at multifamily as one of the best places to invest in real estate right now,” Haddow said. “That and industrial are kind of the two darlings right now.”
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