Tosh Wolfe, Colliers International
CNBC annually conducts a study and ranks the top states for doing business. These rankings are a result of assessing various criteria, including but not limited to the cost of doing business, workforce quality, access to capital and business friendliness. CNBC’s results in 2014 were very telling. Four of the top 10 states are located in the south. The South’s top 10 finalists in CNBC’s study were Georgia (1), Texas (2), North Carolina (5) and Virginia (8).
In addition to these empirical studies, major corporations are voting as well. The verdict is that many organizations are choosing to relocate corporate headquarters to Atlanta. Recently, marquee brands such as Mercedes-Benz USA and State Farm all have made plans to open or expand major corporate centers in our city. Decisions such as the Mercedes-Benz move is expected to result in approximately 1,000 new high-quality jobs. The Metro Atlanta Chamber reports that since 2011 Atlanta has been the beneficiary of over 9,000 jobs as a result of similar decisions. These decisions are for a variety of reasons, but commonly noted are the cost to do business and the availability of top talent.
With an attractive cost of living and the availability of the jobs, many of the nations’ educated young people are calling Atlanta home. City Observatory in an October 2014 study cited Atlanta as having attracted a large volume of human capital ages 25 to 34. These location decisions by young people are driven by availability of jobs, among other things.
As a result of the creation of new jobs and the population growth in our city, property occupancy rates and rents are increasing in all asset types. The result is new development in all asset categories: office, multifamily, industrial and retail.
Admittedly, rents and development are going well in many markets due to low costs of capital and good economic data, and it is not just limited to Atlanta. The Bureau of Labor Statistics reported a 5.5 percent unemployment rate in March. The price of oil is nearly $52 per barrel, and we have a strengthening dollar. These are all good data points for the broad economy and real estate markets. However, the South and Atlanta in particular are in a better position long-term. A deeper look at the labor data reveals some concerns.
Considering the labor statistics around “discouraged workers” and workers defined as “part-time for economic reasons”, there is still a considerable portion of the workforce that is underemployed. One result of underemployment is wealth polarization.
Wealth polarization is evident today in the consumption patterns we see in the retail industry. By most accounts luxury and discount brands are doing well, and operators in the middle have stagnant sales. This polarization or income inequality is a concern for any economy and the real estate industry.
Atlanta and the Southern region are certainly not immune to the labor issue described above. We are experiencing income polarization just like other areas of the country. However, as more businesses like Mercedes-Benz and State Farm choose to take advantage of the local business climate, the city is the beneficiary of new jobs that span the skill and income spectrums. These jobs serve to reduce wealth polarization and income inequality. As a result, Atlanta and the rest of the region will experience a more stable and prosperous economy. The underlying structure created by this type of job growth and business environment will be just one more element that sets Atlanta apart from the rest of the country.
— By Tosh Wolfe, Senior Vice President, Director of Retail Services, Colliers International. This article originally appeared in the May 2015 issue of Southeast Real Estate Business.