By David Pendered
Chris Leinberger’s theories on the durability of walkable communities are holding up in the current setback in apartment sales and rent growth that’s been observed by CoStar. In a nutshell: Folks will pay a premium to live where they can avoid traffic congestion.
Leinberger espouses a theory that WalkUPs, or Walkable Urban Places, represent the future of urban lifestyles. The notion is that most people want meet most of their daily needs within a quarter-mile walk through a pedestrian-friendly neighborhood. Leinberger evaluated metro Atlanta in a report released in 2013.
CoStar released a report the first week of May that speaks to the price-point durability of apartments in walkable communities. CoStar is an information company serving the commercial real estate sector.
CoStar’s report begins by noting that rent growth and sales volume have cooled across more than a dozen of the nation’s hottest multifamily markets, compared to the same period a year ago, according to a statement from the company.
The one segment that hasn’t chilled is the sector of apartments in walkable neighborhoods. Values in this sector have continued to grow at an eye-popping rate of 167 percent since 2010 for the most walkable apartment projects, according to the statement.
Consider a decision by the New York City-based Blackstone Group to pay $199 million for two projects near Emory University, according to a May 9 CoStar report.
Traffic congestion in this region is super heavy even by Atlanta standards. Vehicles travel to and from Emory’s campus, its health centers, and the adjacent Centers for Disease Control and Prevention. These two projects that Blackstone purchased present a walkable/bikeable lifestyle for those who work in Emory’s environs.
Atlanta-based Cousins Properties and Gables Residential sold the parcels. The 75/25 percent venture resulted in Cousins harvesting about $150 million out of the sale, according to the CoStar report.
One of the two projects is the five-story Gables Emory Point apartment complex, built in early 2013 at 855 Emory Point Dr. The other is Emory Point, a mixed use development on Clifton Road adjacent to the Centers for Disease Control and Prevention.
CoStar’s statement on the multifamily sector did not include figures on metro Atlanta’s market.
Mayor Kasim Reed’s proposed budget for Fiscal Year 2018, which begins July 1, does not readily provide much insight. That’s partly because the city consolidated the once-separate building permit fund into the general budget. The account now includes revenues from building, plumbing, electrical, HVAC, zoning verification fees, and building inspection commercial liquor license fees, according to a citation in the budget.
That said, Reed’s buget proposal does contain forward-looking information provided by the University of Georgia’s Selig Center for Economic Growth. Projections show the growth rate in all building permits (single family, multifamily and commercial) trailing down from a 13.9 percent increase in 2017, to a 2.7 percent decrease in 2020 (compared to 2019). Growth returns in 2021 at 2.9 percent, and 4.0 percent in 2022.
CoStar did observe this finding about the national overview:
- “[O]ne segment of the high-end urban apartment market continues to stand out. Those in the most walkable locations continue to outperform, based on a CoStar analysis of apartment sales ranked by price per unit. Apartment buildings with Walk Scores more than 90, denoting a ‘walker’s paradise’ based on an algorithm awarding points for proximity to businesses, parks, theaters, schools and other common destinations, recorded a 16 percent increase in price paid per unit year-over-year in the first quarter of 2017.”
These financial points about walkable communities are in complete contrast to those that require greater use of cars or other motorized transport, according to CoStar’s report. The multifamily sector is,“building to a crest,” CoStar reports, with sales of apartment properties dropping by 43 percent in the first quarter of 2017, compared to first-quarter of 2016.
CoStar’s report observed:
- “Average apartment rent growth has also flattened out over the last several quarters, especially in CBDs where developers have piled on new units catering to a relatively small pool of high-end luxury renters. That supply pressure is reflected in the vacancy rates of 4- and 5-Star properties, which has increased year over year, according to data presented last week at CoStar’s State of the U.S. Multifamily Market First-Quarter 2017 Review and Outlook.”