Retailers are Seizing the Opportunity to Backfill Shuttered Stores in Atlanta
It’s long been known that Atlanta, along with many other markets in the United States, is over-retailed. However, not all retailers are “overstored.” With the recent number of store closings announced (Sports Authority, hhgregg, Kmart, Sears, JC Penney, to name a few), it’s understandable that some have concerns over the current state of retail. That said, for many retailers, these closures become opportunities to enter certain markets or grab better positions within an existing market.
As some retailers forfeit locations, these Atlanta vacancies will be absorbed. Burlington Stores recently backfilled the former Sports Authority adjacent to the Mall of Georgia in Buford, and will do the same with the former Best Buy adjacent to The Mall at Stonecrest in Lithonia. Ashley HomeStore will backfill the former Staples in Snellville. In Alpharetta, American Signature Furniture opened in the former Sports Authority box, and entertainment destination Dave & Buster’s is set to open in a former AMC Theatres.
The retail industry is undergoing a shift as a result of the emergence of e-commerce and morphing consumer habits. It’s the retailers that are able to adapt and evolve along with changes in technology and consumer attitudes that will thrive, as very few are 100 percent immune to these new developments.
For example, in some locations, Kroger, in an effort to cater to the habits of millennials, has added more local and craft food and beverage to its offerings, along with juice bars, cheese shops, sushi bars and wine and beer bars. Additionally, the grocer offers ClickList that enables customers to shop online, select a location and pick-up the order at a specified time.
Burlington Stores is another example of an adapting retailer. The soft goods concept repositioned itself as a general off-price apparel and home product retailer (with less emphasis on coats), and downsized its footprint to 40,000 square feet in order to take advantage of opportunities in new or better locations.
While some brick-and-mortar retailers continue to enhance their omnichannel platforms to better compete with e-commerce retailers, we have also seen historically pure e-commerce retailers opening brick-and-mortar locations in Atlanta, including Warby Parker and Bonobos, with premier locations in Buckhead and throughout the metro area. Likewise, Amazon has plans to expand into brick-and-mortar locations with Amazon Go, a convenience store with automated checkout (one location in Seattle is expected to open this year), and Amazon Books (five locations open with seven noted as “coming soon” on Amazon’s website) — but none are slated for Atlanta as of now.
Perhaps not as widespread as prior to 2007, Atlanta’s retail development pipeline is robust with no signs of a pending slow down. High-profile projects throughout metro Atlanta are currently underway or in pre-development stages, including Phase II of Avalon in Alpharetta, Assembly Yards in Doraville, Dawson Marketplace in Dawsonville, the redevelopment of Colony Square in Midtown Atlanta and The Battery Atlanta at SunTrust Park, among others.
However, long gone are the days of, “If you build it, they will come.” Now more than ever, developers must be thoughtful about location, tenant mix and creating a “sense of community” within their projects. Many suburban cities are taking elements from successful urban initiatives and aligning them with their communities. An example of this is Alpharetta’s planned eight-mile “Alpha Loop” that will connect Avalon, a mixed-use project, to downtown Alpharetta and beyond. This recreational concept is Alpharetta’s version of the Atlanta BeltLine that has already spawned over $1 billion of new development with more expected as the 22-mile track is completed.
According to Reis, nearly 1 million square feet of retail space will be added in Atlanta in 2017 and 2018. The forecasters anticipate Atlanta’s retail vacancy rate will be slightly lower at the close of 2017 and 2018 than its current rate of 11.1 percent, the lowest level since 2008. Furthermore, it’s important to note that average asking rents have risen for seven consecutive quarters and are expected to finish 2017 at $18.78 per square foot.
Atlanta benefits from a diverse economy with jobs spread across multiple industries, from tech to healthcare, and film production to financial services. Forbes recently named Atlanta as the No. 3 American city on its list to become a top tech mecca of tomorrow, citing total tech jobs in the city have grown by nearly 47 percent since 2010 — almost 20 percent above the national average.
Thousands of jobs have been added to the region due to corporate expansions and relocations by NCR Corp., Anthem, Honeywell, GE Digital, State Farm, Mercedes-Benz and others. Atlanta’s housing market, including condominium sales, has recovered since the last downturn almost 10 years ago. Haddow & Co. reports that at the close of 2016, Atlanta’s resale volume for condominiums and townhomes was at its highest level since 2006 with average pricing up 7.9 percent from 2015.
Given Atlanta’s population growth, expanding and diverse employment base and its affordable cost of living and healthy business environment, the Atlanta MSA is expected to remain an attractive area for retailers for many years to come.
— By Cheryl Routson, Broker, and Kyle LeCain, Broker, The Shopping Center Group. This article originally appeared in the May 2017 issue of Southeast Real Estate Business.