Atlanta

Up 3 Places

2012 Rank: 37

2011 Rank: 40

Employment Trends
Total Nonfarm Jobs (thousands) Absolute Change Y-O-Y % Change

40 0 -40 -80 -120

2%
Year-over-Year Change

0% -2% -4% -6%

08

09

10

11*

12**

Supply and Demand

8
Units (thousands) Completions Vacancy

14% 12%
Vacancy Rate

6 4 2 0

rejuvenated job market will take over as the primary driver of vacancy declines in Atlanta during 2012, supplanting the release of pent-up demand and the de-bundling of combined households. In addition, the weak single-family housing market also continues to make contributions to rental housing demand. Single-family foreclosures in the metro remain high, albeit much lower than at the peak of the recession, and the migration of many homeowners to rentals continues to represent a source of demand for apartment operators. The effects of these trends are apparent in the local homeownership rate, which has fallen from 67 percent to 64 percent over the past four years. More stringent mortgage underwriting, high down payments and stagnant incomes are discouraging many prospective homeowners from purchasing and will extend their stay in rental housing. As a result, the Atlanta apartment market appears well positioned for additional declines in vacancy and steady rent growth over the next several quarters. Sales of newer Class A complexes will continue in 2012 as large investors shuffle portfolios and deploy capital that was accumulated during the recession. Cap rates in the metro for this class of property generally start in the 5 percent range. Smaller investors and those seeking higher yields will turn to stabilized Class B assets, which were attracting greater attention in the final months of last year. Cap rates for well-operating Class B properties near major employment hubs and residential services compressed to the mid-7-percent range in 2011 and may decline further as investor demand intensifies. Areas of the market that promise to receive greater attention include northern Fulton County, Cobb County and Gwinnett County, which has many high-demand neighborhoods. In addition to stabilized properties, distress sales will remain prevalent in 2012, especially among apartment owners who face near-term debt maturities. 2012 Market Outlook

Weakened Single-Family Market Keeps Atlantas Recovery on Firm Footing

10% 8% 6%

08

09

10

11*

12**

Rent Trends
Asking Rents Year-over-Year Change Effective Rents

6% 3% 0% -3% -6%

2012 NAI Rank: 37, Up 3 Places. Atlanta improved three spots in the 2012 NAI, though a below-average outlook kept the market in the bottom 10. Employment Forecast: Employers will add 36,000 jobs in the metro this year, a 1.6 percent gain and improvement from the 2,400 spots filled in 2011. Construction Forecast: In 2012, builders will bring 2,900 units online. An average of 5,700 rentals were completed annually over the past 10 years. Vacancy Forecast: Minimal construction and absorption of more than 4,000 units will push down the vacancy rate 40 basis points in 2012 to 7.9 percent. Rent Forecast: Asking rents will climb 2.9 percent in 2012 to $871 per month while effective rents will increase 4.0 percent to $800 per month. Investment Forecast: Investors seeking large, new properties will increasingly turn their focus to Clayton County, located directly south of the urban core. More than 20 percent of the 31,000 rentals in the county were built in the past 10 years and many owners may take advantage of investor interest to sell.
Construction: 900 s Vacancy: 40 bps t Effective Rents: 4.0% s

08

09

10

11*

12**

Median Price per Unit (thousands)

Sales Trends
$80 $60 $40 $20 $0

07

08

09

10

11*

* Estimate

** Forecast

Sources: Marcus & Millichap Research Services, CoStar Group, Inc., RCA

Market Forecast
page 10

Employment: 1.6% s

2012 BLACK TEXT VERSION Annual Report