Updated: Mar 7
As an investor and syndicator of multifamily properties in Texas, Georgia, and Florida, I keep a sharp eye on rents and their overall impact on our properties. The election is over, there will be a new president, and we’re still in the middle of a world-wide pandemic. While the economy is struggling and many Americans are out of work, rents in some markets are soaring. Atlanta is one of those markets. As a devotee of statistics and having a huge passion for analyzing data, trends, and numbers, I wanted to find out the reasons why, as learning the reasons behind this huge rent increase makes me a smarter investor.
After all, Blue Lake Capital owns over 740 units in the Atlanta area alone, and our rents have increased by up to a whopping 40%, which represents a $375 per month increase for some of our units. That would be unheard of during regular times, but those numbers are astounding during an ongoing COVID pandemic with record unemployment numbers. Additionally, while many people are now protected from being evicted thanks to the new national eviction moratorium others who are unemployed and unable to pay their rent could be facing eviction in January. So, why is it that some markets have soaring rents while others are struggling?
Atlanta Rents have Surpassed Pre-COVID Levels
Rental rates in Atlanta have surpassed pre-COVID levels, and as a data driven investor, I wanted to understand the reason for that phenomenon. Part of the answer comes down to supply and demand. Where the rental demand is strong and supply is somewhat limited, the rents will go up.
The main reason for the increase in demand for multifamily properties these days: people are leaving New York City in droves, and record numbers of those leaving are moving to Miami and Atlanta. The moves out of New York City started before COVID struck, which has only helped to exacerbate the number of people leaving. However, what is really telling are the rising number of moves out of New York City when comparing 2019 to 2020. In 2019, according to MyMove.com, an online moving resource guide, there were 18,887 people who moved out of New York City. In 2020 the city lost 110,978 people to other states and cities.
Atlanta doesn’t have the same vibe as Miami, nor does it have the same caliber of entertainment and dining. However, when people began looking for a market that was more affordable than Miami, the next choice was Atlanta. In fact, during the second quarter of 2020, Atlanta had a net gain of 6,600 residents.
Certainly, NYC rents are a major factor for the moves, where a studio apartment can rent for up to $3500, but there are other factors as well. Density in New York City was cited as one of the driving forces for motivating people to leave the densely populated city. COVID was found to spread in densely populated areas, so people left to protect their health and the health of their families.
Another factor that came into play was that it was no longer necessary for many workers to go into an office. Major companies in the city were issuing work from home mandates in an effort to control the spread of the COVID virus. Online interaction via Zoom and other apps have replaced conference room meetings. While that will ease up once the COVID-19 vaccine becomes widely available, many companies have decided that working from home is an economic boost to their bottom line, and many have no immediate plans to ask workers to return to the office. Many companies have told their employees that working from home is perfectly acceptable for the foreseeable future. That’s not to say that the “new norm” is widely embraced, as there are many advantages to having in-person, face-to-face interactions between colleagues.
Atlanta Was a Strong Real Estate Market Even Before COVID