Atlanta Developers Postpone Construction Deals as M-F Demand Wanes

Decreased completions and continual job losses are anticipated to ease the rise in apartment vacancy in Atlanta through the rest of the year, according to a second-quarter report by Marcus & Millichap Real Estate Investment Services. A shortage of construction financing and unease over constant job losses in the city have resulted in developers postponing some plans until the market stabilizes. Last year, 4,500 units were delivered, whereas in 2009 completions are expected to total just 3,300 units. “Investment activity in the Atlanta apartment market is constrained and will be dominated by distressed sales in the coming months,” John Leonard, regional manager of the Atlanta office of Marcus & Millichap, said in a release. “Properties in the hard-hit submarkets of Stone Mountain, Clarkson and West Atlanta that were purchased near the market peak or refinanced under aggressive pro forma income assumptions are more susceptible to foreclosure due to vacancy issues.”Additionally, according to a report, due to continuous additions to supply and a drop in employment-generated demand, vacancy is expected to rise 90 basis points this year to 11.2 percent. Also, by the end of the year, asking rents are predicted to drop 3.8 percent to $828 per month, and effective rents are projected to retreat 2.3 percent to $750 per month.The report indicates that last year the metro recorded one of the largest declines in employment in recent years. However, on a more positive note, while some firms continue to implement cost-cutting actions, others plan to expand. For instance, the J.M. Smucker Co., has picked Atlanta for its Southeast distribution hub, which will lead to the addition of hundreds of jobs near Hartsfield-Jackson Atlanta International Airport. Also, in January CPN reported that Holliday Fenoglio Fowler L.P. secured debt and equity for the development of Glenwood Avenue Apartments, a 325-unit, five-story luxury multi-family community in Atlanta. Construction on the five-acre site, which will have 297,600 square feet of rentable space, is expected to commence in summer 2009 with an anticipated completion date of winter 2010.Moreover, Georgia is forecast to rank ninth in the nation for job growth as a result of the federal stimulus bill, with 106,000 positions projected to be created over the next several years. Construction, however, will decline 27 percent from last year, as the smallest number of units in more than 10 years are scheduled to come online. According to the report, approximately 14,000 apartments are planned in the metro. Many of planned projects in the pipeline are slated for north of Downtown Atlanta, mostly in the Sandy Springs/Dunwoody and Roswell/Alpharetta areas. Furthermore, the close-in Buckhead, Midtown and Central I-75 West submarkets will get the majority of new development, as builders aim their attention to the regions located within close proximity to large employers.