Economic indicators that support the retail market in Atlanta, like unemployment and the addition of non-farm payroll jobs, show positive signs that the sector has recovered from the economic downturn. Unemployment dropped to 6.1 percent in July 2015, compared with 7.6 percent a year earlier, and companies are showing no signs of slowing down on the hiring process. Non-farm payroll jobs in July reached 2.58 million, an increase of 85,000 jobs, or 3.4 percent, from a year ago.
Atlanta’s vacancy rate continues to fall, dropping from 8.1 percent earlier this year to 7.9 percent in the second quarter, according to CoStar. While space is hard to come by, the good news is that some developments are popping up. In fact, during the second quarter, 12 buildings were completed totaling 208,524 square feet.
Mixed-use projects featuring multifamily units are still active, particularly when a grocery store anchor is involved. Fuqua Development is building a six-acre project on Piedmont Road near Cheshire Bridge Road that will feature 300 apartment units, as well as 34,000 square feet of retail space. Sprouts Farmers Market will anchor the retail space with a 26,000-square-foot store.
Sterling Hale, Franklin Street Real Estate Services
Fuqua Development also broke ground on Kennesaw Marketplace in June. Academy Sports + Outdoors and Whole Foods Market will anchor the 288,000-square-foot center, located in Kennesaw. Another strictly retail development is under construction just outside of Kennesaw in Marietta called Parkside West Cobb. The property, located adjacent to The Avenue at West Cobb on Dallas Highway, will include 146,610 square feet, anchored by a Sprouts Farmers Market as well.
The most exciting new project in Atlanta is probably the Atlanta Braves’ new stadium, SunTrust Park, slated for delivery in 2017. The ballpark will feature a mixed-use component, including more than 400,000 square feet of retail and restaurant space. While no tenants have been announced, the developer has made it known that they are targeting 25 percent local tenants, which has the probability of taking something great and local and providing national exposure to them.
Retailers and restaurants are slowly opening at Ponce City Market as well. The renovated Sears, Roebuck & Co. building includes 320,000 square feet of retail and restaurant space. West Elm, Anthropologie, Core Power Yoga, lululemon and Madewell are a few of the retailers that have already opened, along with a handful of restaurants. Buckhead Atlanta is wrapping up construction and its final tenants are opening as well.
Restaurants are still ruling the roost, with quick-serve tenants snapping up end parcels and outparcels for new locations. Bojangles, Chick-fil-A, Dairy Queen, Starbucks Coffee, Pollo Tropical and various pizza concepts, along with the better burger concepts, are a few that are expanding in Atlanta and looking for new locations.
Grocery stores are also actively seeking space, particularly ones focused on fresh produce like Sprouts and Whole Foods. Nine Sprouts have opened in Atlanta already, with more on the way. Wal-Mart Stores Inc. has been expanding throughout the state with its Neighborhood Market concept, recently starting construction for locations in Athens and Hinesville.
A new Whole Foods was just announced in the Chamblee/Doraville submarket, located just outside of the new city of Brookhaven, which has been a hotbed for retail activity. With decent incomes, a booming multifamily scene and easy access to MARTA, retailers and restaurants are flocking to this part of the city. Nearby Buford Highway offers a very diverse restaurant scene with food from just about every kind of ethnicity.
Rents are trending upward and have been for a while, which is making it hard for some retailers like Dollar Tree to expand. They prefer single-digit rent, and availability for that kind of space is rare. Rents in existing centers are slowly creeping upwards, however landlords realize strong national tenants with corporately guaranteed lease agreements bring increased value to a property, allowing for a stable income stream. Rents for new developments can vary depending on location and land cost, but well into the double digits.
As the market remains strong, new concepts will continue to seek out Atlanta as a growth opportunity. Landlords will enjoy rising rents in strong areas of the metro area. The numerous grocery concepts expanding in Atlanta give consumers shopping choices allowing the best to rise to the top. Dollar stores will continue to expand throughout the market.
— By Sterling Hale, Senior Director, Franklin Street Real Estate Services. The article originally appeared in the October 2015 issue of Southeast Real Estate Business.