Affordability isn't just a city of Atlanta problem anymore.
While Central Perimeter is basking in an employment boom, spiking apartment rents risk pricing out the employees of the new businesses from living there.
A panel of developers at Bisnow's Central Perimeter event Tuesday morning said double-digit rent growth is only getting further exacerbated by a lack of new workforce housing supply on top of the steepening prices investors are willing to pay, even for older properties.
“It's going to be devastating,” Grubb Properties CEO Clay Grubb told a Bisnow audience at The Summit office building in Peachtree Corners. "We have a massive problem."
Grubb said 40% of millennials are already finding rents outpacing what they can afford with income.
RADCO Cos. CEO Norman Radow said rents are rising in part because of what investors are willing to pay for existing apartments in Central Perimeter.
He saw it when bidding on a circa 1960s apartment community in Sandy Springs. He offered $130K/unit for the property, but got outbid by three other investors. Radow said he expects that property to close well north of his offer.
“I think we need to acquire as much of the older housing stock as we can and modernize it and deliver it at an affordable price. But that's harder [to do] when you're seeing those kind of prices,” he said, adding that the rental “sweet spot” for the average worker making $50K/year is around $1K to $1,200/month.
“The reason somebody paid $135K a door for a vintage apartment is because we're seeing double-digit rent growth every year,” Grubb said.
The A-word, affordability, has been coming out louder from the lips of residents and city officials for months now, especially with the prospect that Metro Atlanta's population will surpass 8 million residents by 2046, up from 5.7 million people today, according to a projection by the U.S. Conference of Mayors.
The issue of affordable housing in Atlanta has largely been centered on the central business districts of Midtown and Buckhead, especially along the vaunted BeltLine project, where the city and Atlanta BeltLine Inc. are targeting 5,600 affordable housing units along its 22-mile path.
But apartment rents are even rising outside the city. Rents in Atlanta's far northern suburbs — which includes Central Perimeter — saw a 2.6% spike to nearly $1K/month at the end of last year, according to a recent Marcus & Millichap report. In Roswell, rents jumped less, but were even higher, at $1,165/month.
“We saw the need, and it's vitally important,” Radow said. “There's no more [Class-]B and C apartments being built. And the demand is just cascading.”
The influx of rental housing in Central Perimeter is having real positive effects when it comes to transforming the region into a live-work-play destination, panelists said. Plus, Central Perimeter benefits from being a submarket that can draw employees from all across the Metro Atlanta region.
“Certainly for State Farm, I've seen the dot matrix of where their employees live, and this is the bull's-eye,” KDC Regional Vice President Alex Chambers said. KDC developed the massive State Farm office complex in Central Perimeter.
“The reality is [tenants are] looking for walkability, amenities. The age and quality of the building is not as important,” Grubb said. “At the end of the day, it's about attracting talent.”
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