Retail, Office Trends Influence Apartment Development Strategies, Says InterFace Panel
ATLANTA — Much of today’s new apartment projects feature a ground-floor retail component. But developers at France Media’s 10th annual InterFace Multifamily Southeast conference actually expressed concern about this type of development approach.
“The overall retail market is just not what it once was,” said Richard Aaronson, CEO of Atlantic Residential. “A lot of municipalities are recognizing that ground-floor retail in a residential building is not ideal.”
In other words, if there is difficulty leasing the retail space, a bunch of empty storefronts doesn’t bode well for the overall project. Aaronson said his company is implementing ground-floor retail on a limited basis and is instead incorporating first-floor apartments and community spaces.
Aaronson spoke on a panel titled, “What Makes a Development Project Successful in Today’s Market?” Joining Aaronson on the panel was Harvey Wadsworth, managing director with Mill Creek Residential; Peter Joerss, director of acquisitions for PointOne Holdings; Jason Doornbos, executive managing director for Landmark Properties; and John Leonard, first vice president with Marcus & Millichap who served as moderator. The conference took place Tuesday, Dec. 3 at The Whitley in Atlanta’s Buckhead district and welcomed 384 attendees.
Complicating matters, however, is that some cities require new apartment developments to have first-floor retail. An example is Athens, Ga., where Landmark is active. In one of its properties, Landmark actually occupies the ground-level commercial space for its own headquarters. “Our hope is that eventually the city will recognize that some of these spaces just aren’t leasing and that there’s not demand for this much retail in the area,” said Doornbos. “We hope the city will allow us to come back in and potentially convert the space back to residential.”
Location, location, location
For Wadsworth, the success of the retail component is highly dependent on the project’s location. All Mill Creek projects have retail, but they are mostly in urban markets. “The product we’re building in-town with retail and structured parking works because of the urban location it’s in,” he said. “In suburban markets, the rents just aren’t there to support that construction type.”
In Buckhead, Mill Creek is underway on a new apartment community that will add 21,000 square feet of ground-floor retail to the corner of Lenox and Piedmont roads. The community, dubbed Modera Prominence, will include subterranean parking, activated green spaces for residents and the general public, and lots of food and beverage options.
Joerss said his company is looking at all the major markets in the Southeast due to population growth and ample liquidity. But it’s becoming harder and harder to complete deals in those cities because the good sites have been picked over. “Everything’s more expensive and a little more difficult to do,” he said.
PointOne looks for sites that are close to jobs. For example, the firm is working on a project in Newnan, Ga. Though 40 miles southwest of Atlanta, there are 20,000 jobs within a three-mile radius of the development, according to Joerss. “I’d love to find more deals like that,” he said.
Aaronson said his company is beginning to focus on finding opportunities near what he calls “emerging suburban town centers.” An example is downtown Chamblee, Ga., which is just northeast of Atlanta and accessible via public transportation. Aaronson said he’s finding interest from both consumers and investors in the area and that it’s beginning to emerge as a walkable, neighborhood town.
The work-from-home effect
Another factor that’s driving this suburban awakening is remote working, according to Aaronson. For the panelists, an increase in the number of employees working from home is influencing apartment design.
“Basically everything is a coworking space now,” said Wadsworth. “There may not necessarily need to be dedicated places, but everything should be designed so that people can work from home.”
For instance, even amenities such as the pool lounge or bar should be designed with the consideration of laptop use. This means plenty of outlets and USB ports for charging.
For Joerss, it really comes down to having a third place outside of the apartment or the office. “If you have an inviting space inside the community where you can go, you will.”
— Kristin Hiller