Why Atlanta apartments keep getting smaller; higher construction costs a factor

By Douglas Sams – Editor-in-chief, Atlanta Business Chronicle

Atlanta is known for spreading out, but recently more residents in this longtime poster child of sprawl are packing in to tighter living spaces.

Atlanta apartment units built in the past decade averaged 904 square feet, or about 61 square feet less — roughly 7% smaller — than they were in prior years, according to an analysis by RentCafe, a rental listing site.

Atlanta was one of the just five cities in the Sunbelt where new apartments got smaller, along with Charlotte, N.C. and Plano, Texas. 

A local real estate consulting firm shows a similar trend. Haddow & Co. said its data for apartments in Atlanta’s urban core reveals how developers are building smaller units but still charging high monthly rents. The result: higher rent per square foot. Many new studio and one-bedroom apartments in Midtown and along the Eastside Trail rent for more than $3 per square foot, excluding concessions.  

More recently, rents have started to fall, following a historic development boom in parts of the city including Old Fourth Ward and Midtown.  Among the top 50 metro areas tracked by Realtor.com, several Sunbelt markets showed at least a 5% decline in asking rents year-over-year ending in March, American City Business Journals reported. Atlanta was one of them, along with Austin; Charlotte, North Carolina; Nashville, Tennessee; Orlando, Florida; and Raleigh North Carolina.

For the past decade, developers have been building smaller units in response to high construction costs, said Chris Hall, managing partner with Haddow & Co. At the end of last year, key building materials including lumber and steel had jumped 16% to 22% since the pandemic.

Unit designs have also evolved with higher ceilings and more floor-to-ceiling glass. Those design tweaks make smaller apartments feel less cramped, Hall said. Ladson Haddow, another managing partner with the firm, said technology has also improved to accommodate smaller living spaces, such as the evolution of the flat screen TV.

The trend of building smaller units in Atlanta runs counter to the U.S. where apartments increased by 27 square feet in 2023. The average U.S. apartment is 916 square feet, according to RentCafe.

The increase stems from developers completing more two- and three-bedroom apartments last year, as they aimed to meet demand for larger units, RentCafe said. In recent years, more millennials, who were getting married and starting families, were unable to buy homes because of the U.S. housing shortage. Instead, they chose larger apartments.

More U.S. developers have been building smaller apartments over the past decade, until recently. In Atlanta, though, new apartments should continue to shrink, reaching an average 875 square feet over the next year or so, according to RentCafe. But its forecast is for even more dramatic downsizing in parts of the suburbs. In Marietta, new units under construction are averaging 791 square feet — about 25% smaller.

Full article: https://www.bizjournals.com/atlanta/news/2024/06/14/apartments-developers-demand-construction.html