"The region's key industries will lead the recovery, along with corporate expansions and relocations to the area," Leonard says in his company's quarterly apartment market report. "By the second half of 2004, the rental market should show positive signs of improvement as the local economy gains momentum."
Leonard says local employers are expected to hire 39,000 workers by year end, erasing the job losses recorded in 2001 and 2002. "The hiring trend will continue through 2004 when metro-area companies are forecast to create 69,000 positions," the M&M executive says. "The majority of the gain is in the professional and business services sector." But layoffs are expected to continue at some struggling regional firms, he says.
Although new construction is down for the year and could stay that way for most of 2004, Leonard points to the Atlanta/Fulton submarket where over 1,300 units are expected to be completed next year. An estimated 6,300 units will be finished by the end of this year. "This decline is expected to continue through 2004, with only 2,745 units expected" to be completed in all of 2004, Leonard says.
Still, weak apartment market conditions are not deterring investors from purchasing properties in the metro area. During the first three quarters of 2003, investors bought 68 properties. "Out-of-state buyers will continue to lead in dollar volume," the broker predicts.
During the first nine months of 2003, out-of-state capital reached $352 million. The city's current median price of $41,600 per unit is $57,200 less than the median price in California, Leonard says. "Investors are focusing on (Atlanta) properties within the I-285 perimeter and adjacent submarkets," he adds.
As the Atlanta apartment market hits bottom next month, overall vacancies are expected to reach the 11.5% level, Leonard forecasts. "Owners will report flat vacancy through the first half of 2004 and a slight decline of 10 basis points, to 11.4%, by the end of 2004," he says. He predicts the north Gwinnett submarket will post a decline of 50 basis points, to 12.6%, by year-end 2003.
Asking rents will remain flat through year end at an average $798 per month. "Improving tenant demand and a slowdown in building activity will enable owners to regain some pricing power in 2004, allowing for a 1% increasing in asking rents," Leonard projects.
Owners in the Atlanta/Fulton submarket are expected to report a 0.5% increase in asking rents by year end 2003. But by year-end 2004, "asking rents in this market are forecast to decline by 1.3%, to $963 per month," the M&M executive says.
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