As summer vacation approaches, many investors are eager to acquire apartments in Athens and Atlanta. Enrollment at UGA, GSU, and GTU, the largest 3 universities in Georgia, directly affect their local apartment markets. The University of Georgia in Athens is the largest in the state based on enrollment. The 2012 UGA fall enrollment totaled 34,475 students, while GSU had 32,087 and GA Tech had 21,558. The State of Arizona has the largest public and private universities: the online U of Phoenix has more than 300,000 students and ASU has over 70,000. They accomplish the numbers, but the Georgia top 3 public universities exceed Arizona’s.
Many investors and analysts follow university enrollment to determine the strength of the multi-family market in that area. UGA drives more than 50% of the multi-family market in Athens while GA Tech and GA State have a higher impact on the Atlanta properties adjacent to campus. UGA has a 15 mile radius of impact on Athens market, yet GA Tech and GA State have less than 1 mile radius for major impact. Thus enrollment at UGA has more influence on the overall Athens multi-family market than GA Tech or GSU has on the Atlanta market.
The Atlanta multi-family market is primed for growth based on the absorbtion rate exceeding the construction rate by five times. In the first quarter of 2013 Atlanta absorbed 1,600 units while only building 320 new units. Only 2% of Atlanta’s apartment inventory has been built since 2009. Atlanta’s vacancy rate decreased more than 4% between Q4 2012 and Q1 2013. The justification for construction may be here, but vacancy rates need to continue to go down before Atlanta beats the Southeast and US averages.
Athens has a higher vacancy rate than Atlanta and UGA’s enrollment was down in the fall of 2012 compared to 2011. Nothing has been built since 2009 showing high demand for new apartment construction in Athens if $900 units can be built. Atlanta construction is justified at a higher rent average of $1,100 per unit based on average asking rents for the newest apartments.
UGA, GSU, & GTU drive the values of the properties adjacent to the campuses. With UGA’s enrollment down in 2012, acquisitions of aged apartments in Athens are not advisable. They will report 2013 fall enrollment in October and the final number will have a high impact on the value of existing apartments. GSU & GTU may continue to absorb the condo rentals near their campuses before there is justification for mid to high rise construction, although low rise construction and tear downs are highly justified if costs can remain low enough to deliver a $1,100-$1,500 unit. If one had to choose between the Atlanta and Athens market for acquisitions, Atlanta would be the choice based on GTU and GSU enrollment growth and Atlanta’s lower vacancy rates than Athens. Both markets have strength for new construction.