The capital of the South: real estate investing in Atlanta
Growth markets
12/22/2022
Written by Tom Brady
Reviewed by Mynd Editorial Staff
Atlanta has far surpassed its unglamorous beginnings — founded in 1847 at the terminus of the Western & Atlantic rail line.
From its days as a military supply hub during the Civil War, to its burning by Union troops (the backdrop of “Gone With the Wind”), to the first serving of Coca Cola in a city drugstore in 1886, to its vital role in the 1960s Civil Rights movement (Martin Luther King Jr. was born there), to hosting the Olympics in 1996, this metro area found a way to surpass older, more scenic places to lay claim to capital of the South.
Frederick Allen traced the city’s ascension to regional dominance in his book “Atlanta Rising: The Invention of an International City 1946-1996.” Allen recounts how city and corporate leaders collaborated to create a business-friendly environment.
Perhaps the city’s new vibe is best captured by the television show named after it that was created by Donald Glover, who was raised in nearby Stone Mountain, Georgia.
“Atlanta” features Earn, a Princeton dropout played by Glover, as he tries to help his cousin Paper Boi launch his music career. Labeled an “existential comedy” by one critic, the series follows Earn and his cousin’s forays into Atlanta’s rap scene in pursuit of stardom.
The city itself serves as a backdrop for a world where success is elusive, and the reality of the struggle is unvarnished.
Atlanta's Centennial Park on a clear day epitomizes some of the best parts of Atlanta: big sky, a diverse city, and opportunity.
Those struggles and human failings belie that fact that Atlanta has made it: It’s now important enough to serve as the setting for a television series, created by one of the most versatile and exciting artists working today. (Aside from writing, acting, producing and directing, Glover has a musical alter ego, Childish Gambino, who has had a number of chart-topping songs, including the much-dissected "This Is America," from 2018.)
It is a place that attracts ambitious young people from throughout the South, and the growth of the housing market shows it. For those who left for cities in the North and are looking to return, most are not returning to the small towns in Georgia — or Mississippi, South Carolina or Alabama — that they left.
They are choosing Atlanta, where a diverse community and a relatively progressive political atmosphere prevails.
“There is an in-migration to Atlanta from throughout the Southeast,” said David Zanaty, the head of institutional strategy at Mynd. “We have a lot of real estate refugees who are coming here and loving our cost of living.”
The National Association of Realtors placed Atlanta at the top of its list of "10 housing markets expected to lead the nation in 2023."
People are investing in Atlanta despite price hikes
That cost of living is starting to edge up as the Atlanta real estate market heats up.
Still, the people — and the real estate investors — keep coming. The Atlanta metropolitan area population has risen by 400,000 people since 2015, according to the Census Bureau.
It added another 34,000 people in 2020 and the population growth continues: the metro area exceeded six million at the beginning of 2022, a 1.73 percent increase from 2021, making Atlanta one of the fastest-growing metro areas in the country.
Meteoric climbs in home values have slowed in hot markets nationwide, and some have even seen prices begin to drop, including Hotlanta, as it's often called, as indicated by stats from Realtor.com:
Median list price was $413,900 in November 2022, up 3.5 percent year-over-year.
Median home sale price was $395,000, up 4 percent year-over-year.
Median days on market was 54, up from 50 a year before.
The Atlanta metropolitan area population has risen by 400,000 people since 2015, according to the Census Bureau. It added another 34,000 people in 2020 and the population growth continues: the metro area exceeded six million at the beginning of 2022, a 1.73 percent increase from 2021, making Atlanta one of the fastest-growing metro areas in the country.
The median rent on a single family home in December 2022 was $1,726, up 11.7 percent year-over-year, according to John Burns Real Estate Consulting.
Employment growth in Atlanta
The area is home to 18 companies that are on the Fortune 500 list, including Home Depot, Coca-Cola, Delta Airlines, Aflac and the United Parcel Service. Hartsfield-Jackson Atlanta International was the busiest airport in the world for 20 years running, until it was dethroned recently by a competitor in China.
“Atlanta became what it is because it is a hub of transportation, including rail and air,” said Zanaty. “It’s also got a lot of diversity in the economy — it’s not just oil, it’s not just tech.”
“This makes it very resilient in a downturn,” he added.
There are also 57 universities in the Atlanta region, including Historically Black Colleges and Universities such as Clark Atlanta University and Spelman and Morehouse colleges; the highly ranked private Emory University; and public institutions such as Georgia State University and the Georgia Institute of Technology (aka Georgia Tech). These bring a built-in market for rental property.
The former industrial complex of Pullman Yard now hosts recreational facilities, exhibits and restaurants.
With all the corporate activity in Atlanta, salaries are competitive.
“There are very high occupancy rates and demand is incredible,” said Mike Overley, director of single-family rentals at Mynd. More than 80 percent of the jobs that were lost during the pandemic are back, in fields as diverse as technology, services and sales, he added.
Overley worries that the city may be too popular for its own good.
“Prices are up to unhealthy levels,” he said. “Affordability is a concern. If you want to be close to town, you’re going to have to pay for it.”
But one of the city’s strong suits, according to Overley, is its ability to attract people from all over. “It’s such a melting pot here,” he said. “You see it when you go to a sporting event in town. There are people wearing jerseys from cities all over the country.”
The downsides of growth in Atlanta
Challenges for the Atlanta region include improving its transportation options, mainly by expanding the Metro Atlanta Rapid Transit Authority (MARTA), the bus and rail network that serves the area. Efforts to build more rail lines have run into local opposition in the suburbs, where most people rely on cars.
Regional planning runs into roadblocks, Zanaty said, because there is a “balkanization of jurisdictions,” with metro Atlanta encompassing some 28 counties and 140 cities, give or take. Georgia has some of the smallest counties in the country.
“Getting alignment around a broad strategy is pretty hard,” he said.
One upshot of this lack of regional planning is that there is a dearth of affordable housing near the area’s job centers. And with more development — something like 33,000 housing starts a year — traffic and sprawl are ongoing concerns.
A bright spot in the Atlanta housing market, according to Overley, is the gentrification of the southern part of the metro area, which is divided from the north by I-20, an interstate that travels east to west. Previously, this area had issues with crime and subpar schools, both of which have seen improvements.
“The south side of Atlanta is picking up some steam,” Overley said. Meanwhile, “northwest Atlanta is going crazy with the areas that have been redeveloped.”
And with housing prices on the rise, the rental market is looking more attractive to many Atlanta transplants. Since the city has no natural boundaries, like a mountain range or a coast, it will keep growing outward as new residents arrive.
Challenges facing Atlanta and Georgia as a whole
Like many other big American cities, the city is struggling with an increase in violent crime, as the Atlanta real estate investor should be aware. Researchers attribute part of this nationwide trend to the strain wrought by the pandemic on at-risk urban residents, and its impact on the courts and police departments. (Crime levels in American cities are well below historical highs in the late 1980s and early 1990s. There were 160 homicides in Atlanta in 2021, about the same as in 2020. Homicides peaked at 246 in 1989.)
Georgia’s recent election law, signed by Governor Brian Kemp, did cause a backlash among corporate CEOs and led Major League Baseball to relocate its All-Star game from Atlanta to Coors Field in Denver. Large corporations located in Atlanta, including Coca-Cola, Home Depot and Delta Airlines, offered statements in support of voting rights but initially said little about the law specifically. The law spurred a group of 72 black executives to sign a letter calling on all of corporate America to publicly and directly oppose new laws that would restrict the rights of black voters.
Ponce City Market hosts shops, restaurants and offices, and is located in the Old Fourth Ward neighborhood along the Atlanta Beltline, across from Historic Fourth Ward Park.
The law imposes new voter ID requirements for absentee ballots, empowers state officials to take over local elections boards, limits the use of ballot drop boxes and makes it a crime to approach voters in line to give them food and water.
Court challenges of the law loom, and the U.S. Justice Department has sued the state of Georgia. With an election for governor coming up, and a state that went for Democrats in both Senate races in January 2021, the struggle over the election law is ongoing. But so far it appears that it has not directly affected Atlanta’s business-friendly atmosphere.
The 10 best places for investment properties in Atlanta
Since there are no mountains or coastline to limit expansion of housing development, the Atlanta metro area spreads in all directions. It's officially designated the Atlanta-Sandy Springs-Alpharetta, GA Metro Area by the Census Bureau and other federal agencies, and there are almost seven million people spread over 39 counties and almost 8,700 square miles. Public transportation is limited, so traffic and sprawl are issues, with implications for the real estate industry.
“The real estate market on the south side of Atlanta is picking up some steam,” Overley said. “There are a lot of those little pockets that have gentrified that you would not have looked at before.”
A common theme for many of these submarkets leading the Atlanta market in new home starts over the past year is housing at price points below $400,000.
“As affordability continues to be an issue in the Atlanta real estate market, ‘drive until you qualify’ is in full force again as we see the development moving further and further out of the metro area," Overley said.
These are among the areas that Overley identified as the hidden gems for Atlanta investment property.
1. West side of Atlanta, AKA Grove Park
Grove Park has seen tremendous growth in the last few years. Several tech companies have relocated there, causing a boom in the housing market.
One of the corporations making a big commitment to Atlanta is Microsoft, which is developing a 90-acre campus in Grove Park, which will make real estate investments all the more appealing.
"When we open the doors to our offices in Atlantic Yards this summer, we will be able to seat 2,500 employees across the region, including our sales locations in Alpharetta, Buckhead and Midtown. And this number will grow further as we scope and build out facilities in Quarry Yards and Quarry Hills (in Grove Park),” Microsoft president Brad Smith announced in 2021.
2. Jonesboro
Jonesboro is the county seat of Clayton and is known as the official “home” of Margaret Mitchell's “Gone With the Wind.” There are many older homes kept in good condition, which lends the city its historic atmosphere. Studies predict employment growth in the next 10 years to be 46 percent, higher than the national average of 33 percent, a bonus for real estate investing.
3. McDonough
McDonough, the county seat of Henry County, attracted more than 2,600 new jobs and $451 million of investment from 10 projects in 2020, according to development officials. Zinus Inc., a Korean e-commerce mattress and furniture company, recently announced a $108 million investment and 804 new jobs at an old million-square-foot Toys “R” Us distribution center in McDonough. These developments will support healthy real estate prices.
4. South Metro Atlanta
The real estate market in the six counties of South Metro Atlanta — Henry, Coweta, Fayette, Spalding, Clayton and South Fulton — barely skipped a beat during the pandemic. The availability of developable land, good access to interstates and a well-trained workforce led to the expansion of industrial, logistics and manufacturing operations across the region, supporting both commercial and residential real estate prices.
“As affordability continues to be an issue in the Atlanta real estate market, ‘drive until you qualify’ is in full force again as we see the development moving further and further out of the metro area," Overley said.
5. Dallas
Dallas, in Paulding County, which is located some 38 miles northeast of downtown Atlanta, is known for its good public school system and its historical city center. Visitors and residents can ride the Silver Comet Trail, a rails-to-trail paved path taking cyclists all the way to the Alabama state line in one direction, and to Atlanta in the other. The population growth rate is almost 28 percent, from 11,600 in 2010 up to nearly 15,000.
6. Forsyth County
Forsyth County has been one of the state’s fastest-growing for the last decade or so, and fueling the growth are job opportunities in nearby Alpharetta and northern Fulton County. It is equidistant from the cultural offerings of Atlanta and the recreational opportunities in the Blue Ridge Mountains. Its housing stock is mostly new and affordable, and the public school systems are highly ranked. The county’s median annual household income has risen over $100,000 with the influx of highly paid professionals.
7. Woodstock and Canton
Woodstock and Canton in Cherokee County are 30 and 40 miles or so north, respectively, of downtown Atlanta, and Canton is at the southern tip of the Blue Ridge mountains. Woodstock is one of the fastest-growing cities in the suburbs, with a 45 percent increase in the last 10 years. Its population is nearly 35,000 now. Cherokee County now has some 250,000 people, up from just 90,000 in 1990, and it is known for having some of the best public schools in Georgia.
8. Dacula
Dacula in Gwinnett County is a little less than 40 miles northeast of downtown and has grown almost 50 percent since the last census in 2010; it now has a population of about 6,500. It is known as one of the more livable cities in suburban Atlanta with good public schools.
9. Flowery Branch
Flowery Branch in Hall County is about 45 miles northeast of Atlanta on the shore of Lake Lanier. Its population has increased by 62 percent since the 2010 census; it is now home to more than 9,200 people.
10. Newton County
Newton County had minimal real estate activity for several years after the downturn in 2008 but has seen huge population growth the last couple years, mostly fueled by the promise of Facebook investing up to $42 billion in the county and the surrounding area over the next couple of decades, supporting rental property investing for years to come.
