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Multifamily and retail transactions drive sales volume increase
Though Atlanta’s commercial real estate transactions are still lagging pre-pandemic norms, the total investment sales volume in the second quarter is up by nearly 20% from the same quarter of 2023.
As the cost of borrowing money increased along with tighter lending standards, real estate sales slowed dramatically. Atlanta sales volume in 2023 was over 60% lower than in 2022.
However, transactions have increased recently. Investment sales volume in the second quarter of this year was higher than in the previous five quarters.
The increase in total sales volume was driven by growth in multifamily and retail, with multifamily increasing 29% and retail increasing 37% from the second quarter of 2023. Industrial sales volume increased by about 8%, while total office sales volume decreased by roughly 10%.
Multifamily sales last quarter totaled over $1 billion. Out-of-state investors continue to drive investment volume in Atlanta, with national firms accounting for over 80% of buyer volume last quarter.
In April, Weinstein Properties acquired the 362-unit property at 1500 Westshore Drive, renaming it Bexley Westshore. The 2022-built complex was purchased from the developer Atlantic Residential and Ares for $118.5 million or $327,350 per unit, delivering a pro-forma cap rate of 4.58%.
Weinstein has been one of the top buyers in the Atlanta area over the past several years. The Virginia firm has purchased several properties in the region of late, including in suburban Duluth, the Cumberland area and Summerhill south of downtown Atlanta.
Along with difficult capital markets conditions, rent growth has been a limiting factor for dealmaking in Atlanta. After a record annual increase of rents by about 16% in 2021, Atlanta has seen average asking rents fall. Year-over-year rent growth turned negative in early 2023 and will likely persist through the end of this year.
While Atlanta’s second-quarter multifamily sales outpaced last year’s, the total is about 38% lower than the 2014 to 2019 quarterly average. On the other hand, retail transaction volume last quarter was over 25% higher than the pre-pandemic average.
Many of Atlanta’s largest recent retail transactions include grocery-anchored developments and portfolios, with more deals in suburban areas. In April, Jamestown purchased Fountain Oaks, a Kroger-anchored shopping center in the affluent suburb of Sandy Springs. Washington, D.C.-based Edens sold the 160,000-square-foot center for $47.9 million, or about $299 per square foot. The 1988-built development was 98% leased at the time of sale.
Annual retail rent growth reached an all-time high of 6.4% year over year in 2023. The forecast shows a decrease in the pace of Atlanta’s retail rent growth for 2024 and 2025, falling to about 3% over the next 12 months. This shift, along with elevated interest rates and uncertainty around federal monetary policy, will likely keep transactions muted.
The second half of the year typically has a higher total sales volume than the first half in Atlanta, meaning the region could continue to see some growth in transaction activity over the next few months. Industry participants expect rate cuts to stimulate deal activity.
