Atlanta is the economic engine of the Southeast, which is the fastest growing region in the country. With a population of 5.5 million across the 28-county metro area, the city is the ninth-largest metro nationally and is projected to be the sixth most populated by 2020. Atlanta’s high quality of life and low cost of living make it an ideal destination for young and educated talent around the region, as well as growing companies. Atlanta is home to 16 Fortune 500 companies and the busiest airport in the world — the recipe for a business boom and hot office real estate sector. According to Georgia State University’s Economic Forecasting Center, Atlanta is projected to add 305,000 new jobs between 2010 and 2016, with a drop in the unemployment rate to 5.7 percent in the same timeframe from the current rate of 7.5. That is a 13.5 percent increase in job growth over six years. The technology, homebuilding and service sectors are returning to health, if not climbing to new heights. According to CBRE’s U.S. Tech-Twenty research report, tech employment in Atlanta rose nearly 11 percent between 2011 and 2013. CBRE Research also finds that Atlanta’s recovery is underpinned by an …
Market Reports
The U.S. hotel market continues to gain strength following the Great Recession, where in 2009, revenue per available room (RevPAR) fell by 17 percent making it the single-worst performing year in the history of the hotel industry. Atlanta, which is one of the top 25 hotel markets in the U.S., as defined by Smith Travel Research (STR), the hotel industry’s leading performance data provider, experienced a similar decline with RevPAR falling by 18 percent in 2009. Since that time, across the country RevPAR has grown at a compounded average growth rate (CAGR) of 6.4 percent. Atlanta’s RevPAR CAGR during this time period has been 6.1 percent. The main reason Atlanta’s recovery has trailed the nation is related to its average daily rate (ADR). Atlanta’s ADR CAGR has been just 1.3 percent since 2009 as compared to 3 percent for the U.S. Put simply, hotels in Atlanta have not been able to grow their average rate as much as the U.S. average coming out of the recession. The Atlanta hotel market, like other segments of the Atlanta real estate market, has historically tended to get overbuilt when times are good. While hotels often do not represent the “highest and best use” …
Though Atlanta has had a reputation as a boom-or-bust town for many years, it has struggled to maintain a thriving multifamily development business. However, an in-depth look at the current local trends shows a strengthening multifamily market, and with it, an evolution of many lower-cost neighborhoods into desirable development and residential sites. Now, the city is poised for a more sustainable future as demand for apartment housing inside the Perimeter continues to increase. Classic institutional developers are seeking to use this increasing demand as a platform to boost Atlanta to a new strata in line with New York, Boston and other metropolises such as Houston and Dallas. With no significant barriers to entry, active merchant buyers are taking advantage of Atlanta’s large developable land supply to support new high-density multifamily developments. Developers are working to stabilize the supply in response to the overwhelming demand; three- to five-year waves of building and development will help grow the market steadily. Amid the current five to 10 percent growth rate, some in-town projects are predicted to trade at higher levels than ever before. For example, 77 12th Street is widely expected to trade for more than $300,000 per unit — a robust figure …
With an economy that’s normalizing with improving fundamentals, the Atlanta retail market is on the right track for sustained growth. Throughout 2013, Atlanta experienced a drop in vacancy rates along with the unemployment rate. In addition, retail sales rose nearly 3.5 percent over last year, provoking a rise in consumer confidence. The unemployment rate in Georgia fell from 9 percent in 2012 to 8.3 percent in 2013. This is still a full point below the national average. For 2014, the unemployment rate in Georgia is expected to reach well under 8 percent. During the last 12 months, Atlanta has experienced job growth of 2.5 percent. Retail payrolls are also expected to continue improving in 2014, pushing a near 3 percent gain as a result of both increasing existing stores sales as well as modest new store opening growth. Vacancy Rates, Rent Growth Since the beginning of the year, overall metro retail vacancy rates have dropped below 11 percent, which is a 50 basis point decrease over last year. Neighborhood and community retail centers still maintain the highest vacancy of just under 15 percent. Power centers have experienced a strong year-over-year recovery, averaging a 7.5 percent vacancy across the region. Tenant …
With an economy that's normalizing with improving fundamentals, the Atlanta retail market is on the right track for sustained growth. Throughout 2013, Atlanta experienced a drop in vacancy rates along with the unemployment rate. In addition, retail sales rose nearly 3.5 percent over last year, provoking a rise in consumer confidence. The unemployment rate in Georgia fell from 9 percent in 2012 to 8.3 percent in 2013. This is still a full point below the national average. For 2014, the unemployment rate in Georgia is expected to reach well under 8 percent. During the last 12 months, Atlanta has experienced job growth of 2.5 percent. Retail payrolls are also expected to continue improving in 2014, pushing a near 3 percent gain as a result of both increasing existing stores sales as well as modest new store opening growth. Vacancy Rates, Rent Growth Since the beginning of the year, overall metro retail vacancy rates have dropped below 11 percent, which is a 50 basis point decrease over last year. Neighborhood and community retail centers still maintain the highest vacancy of just under 15 percent. Power centers have experienced a strong year-over-year recovery, averaging a 7.5 percent vacancy across the region. Tenant …
Savannah has historically been known as an under-retailed market. Barriers to entry to the market have included expensive land acquisition and development costs, natural geographical barriers such as wetlands and rivers, oddly configured land parcels and stubborn sellers. Savannah is overcoming those barriers with authority as existing retailers expand within the market and previously nonexistent retailers enter. The unusual amount of retail development in an MSA of 360,000 people means Savannah is officially on the radar of quite a few retailers. Westside/Pooler Parkway The largest development within the area broke ground in early September and will be a big win for the entire Southeast. Ben Carter Enterprises commenced construction on The Outlet Mall of Georgia in nearby Pooler, comprising more than 560,000 square feet of retail and restaurant space. The outlet mall will house more than 170 retailers, of whom 70 percent are committed. The $200 million project will employ upwards of 2,000 employees, creating a boon for the local economy. A mix of luxury and traditional retailers is expected, of which 40 percent are reported to be new to the market. Also, 45 acres of adjacent land is being marketed for retail, restaurant and hotel site development. This project …
Lease renewals and, in some instances, expansions into larger layouts, are occurring in Atlanta as employers create new jobs. The metro has also landed some plum relocations recently. State Farm and General Motors have chosen the metro as the site for regional headquarters, and the firms will create thousands of jobs during the next several years. Many of the GM jobs are new information technology positions and they are coming here in response to the metro’s highly skilled and educated work force. As the region becomes an information technology hub in the Southeast, other employers are also adding workers. AT&T has expanded its presence by filling 600 IT positions and plans to hire an additional 1,000 employees throughout the state. Additionally, Airwatch, a mobile software firm, has already hired 200 Atlanta workers and expects to create 600 more positions by year end. Other companies, such as InfoSystems, ExactTarget, PulteGroup Inc. and Spanx, are also planning to expand operations in the metro. Scheduled expansions by these employers and recent additions to payrolls have helped to fill office space that has been vacant since the trough of the recession. The Atlanta office market will make strides by the end of this year, …
From farmland in the early 1970s to a major economic center in Georgia and the Southeast today, Central Perimeter has evolved into the dominant office submarket in metro Atlanta and an employment center larger than the downtowns of Nashville, Charlotte or Jacksonville. A corporate hub, Central Perimeter contains the headquarters of nearly 50 companies, including four that are Fortune 500s. During 2012, Central Perimeter also was the most active submarket in metro Atlanta, accounting for more than half of the region’s total office space absorption at 1.7 million square feet. The largest lease transaction in metro Atlanta in 2012 was in Perimeter. State Farm opened a new customer service center in nearly 500,000 square feet of space in two buildings in Dunwoody, which created 500 jobs. Metro Atlanta’s largest office sale in 2012 was the $300 million purchase of the 2.1 million-square-foot Concourse Corporate Center that includes the landmark King and Queen buildings. Additionally, Cox Enterprises added two buildings totaling 600,000 square feet to its Perimeter campus, delivering the largest office construction project last year. Central Perimeter is maintaining this strong activity in 2013, with State Farm leasing nearly 200,000 square feet of additional office space, adding 800 jobs. Also, …
Overall, the Atlanta real estate market has continued to improve. Low interest rates have helped stabilize assets and attract new business, with manufacturing leading the way. At the end of first quarter 2012, CoStar Group reported the overall Atlanta industrial vacancy rate was 15.5 percent. For the same period ending in 2013, CoStar reported the vacancy had fallen to 12.7 percent. Those numbers have not come easy and are a true testament to the quality of Atlanta’s real estate brokers, landlords and owners who have shown a creative ability to solve problems and make deals. The past 12 months have been filled with exciting new project announcements, including build-to-suits. Among the companies that have announced construction projects include Baxter Healthcare, Porsche, PPG, Caterpillar, Hill Phoenix and Mitsubishi. Additionally, companies such as US Lumber, Subaru, American Building Supply, Atlanta Bonded, Carters and Decoster have recently expanded, filling existing vacancies in the market. While the list is impressive, we need more expansion from the existing industry. According to the U.S. Census Bureau, the population in Atlanta’s MSA was 5.4 million in 2012, which included 1.9 million households. STDB Online data service projects that the Atlanta MSA population will increase at an average …
The Atlanta metro has been named one of the top cities for job growth and the population is rising at one of the fastest paces in the country, creating high demand for rental housing that will persist. Last year, an average of 200 residents per day moved into the area, and nearly 21 percent of the entire metro population falls within the prime renter cohort, which includes people between 20 and 34 years old. Uncertainty in the housing market is driving up the age of the first-time homebuyer. As many young adults form rental households in lieu of ownership, they will likely choose to live in modern, luxury apartments near entertainment and business districts. Meanwhile, in the single-family market, permitting activity remains well below prerecession levels and sales of existing single-family homes are just 57 percent of peaks reached before the recession, confirming that many of these new residents are looking for rentals. Apartment construction is at an all-time low this year, and demand for units will outpace new supply by more than seven times. As a result, vacancy will fall to the lowest point in over a decade, allowing operators to boost rents and match prerecession peaks. Looking at …