Rising vacancies (10.3%) and zero rent growth, along with a large construction pipeline moved Atlanta to the bottom of the list. The national rankings are based on a series of 12-month forward-looking supply and demand indicators.

Bad as the ranking sounds, the M&M report suggests it will worsen as the year progresses, predicting a year-end vacancy mark of 11.5%. The Atlanta apartment investment market won't improve until 2004, even as employment growth is expected to bounce back to over 2% in 2003. That would translate to 43,000 new jobs on a year-over-year basis, M&M says.

"Apartment investors have become increasingly weary of paying premium prices for assets that have been under increased pressure lately," the report states. "Affordable financing has not been enough to entice buyers into paying higher prices for properties that have been experiencing diminishing net operating incomes."