Retailers Try to Keep Up With Atlanta’s Dynamic Consumer Population
To understand the state of retail in Atlanta in 2005, you first looked at where and what developers were building, then to where retailers were locating and lastly to how consumers were shopping. Simply put, if a developer built it and a retailer occupied it, the consumer was sure to shop there, but that’s no longer the case. To understand the state of retail in Atlanta today, you need to start with the Atlanta consumer.
Go Big or Go Home
From 2000 to 2010, the Atlanta Regional Commission reports metro Atlanta added over 1 million residents with an additional 2.5 million people projected to be added between 2015 and 2040. Further, according to a study by the University of Georgia, half the state’s population growth is concentrated in just three Atlanta metro counties — Fulton, Gwinnett and Forsyth. A big driver for the growth is jobs, especially those in high-paying sectors like information, professional services, science and technology. EMSI reports that two of the counties making up Atlanta’s metropolitan area, Forsyth and Coweta, are in the top eight of large counties for skilled job growth. Additionally, Forbes claims Atlanta is now growing its business service sector faster than New York, Chicago and Los Angeles.
Another important population driver is education, and according to Niche rankings, Fulton, Gwinnett and Forsyth counties are in the top five county school districts in metro Atlanta. Cobb, DeKalb, Fulton and Gwinnett counties make up nearly 60 percent of metro Atlanta’s population.
These uber-performing, higher density markets will continue to experience robust residential growth, higher barriers to entry, lower vacancy, higher rents for retail (eclipsing $50 per square foot in some places), stronger retailer demand, easier sources of financing and increased private investment. Typically, there is also a strong correlation between population density and higher retail sales. As land costs continue to increase, the need for more residential projects will further fuel the vertical mixed-use trend.
Completed projects such as Avalon in Alpharetta and Ponce City Market in Atlanta’s Old Fourth Ward district have been much-heralded highlights of the integrated residential/consumer experiential development movement, with additional large format developments such as Halcyon and Colony Square in Fulton County, The Battery Atlanta in Cobb County and the GM Assembly in DeKalb County about to come on line. While most new projects will not be of the same size and scope, many will attempt to recreate similar experiences.
Who’s Your Daddy?
While Millennials tend to get all the media attention and the 10 to 29 age group makes up the largest segment of the population at 28.2 percent, we cannot ignore the fact that the 45 to 65 age group makes up the second largest segment at 25 percent. From 2000 to 2010, that segment grew by 5 percent while the 10 to 29 age group actually shrunk by 1.5 percent of the overall population.
While the trend for younger residents is to move closer into town, 60 percent of all residents aged 10 to 29 still live outside the city. We’ll also see a more diverse residential population as non-whites and Hispanics made up 91 percent of all new residents from 2000 to 2010. Per capita income is highest in Fulton, Forsyth and Fayette counties, although this is less relevant as it is easier to merchandise around income — whether a retailer or landlord — than a lack of population density.
Although population density is the leading stimulant for the creation of additional retail gross leasable area (GLA), age, race and income are equally relevant drivers. An aging population looks for convenient bricks and mortar retail, services, medical facilities and entertainment.
Grocery categories including traditional (Kroger and Publix), specialty (Whole Foods/365, Sprouts Farmers Market and Trader Joe’s) and promotional (Walmart, Aldi and Lidl) will continue to be a weekly destination of choice and an important catalyst for new development. Fueled by an aging population and up to 30 million new Affordable Care Act patients, medical uses will also continue to be woven into the retail fabric to include uses such as urgent care, family practices, dentists, physical therapy and chiropractors.
Millennials will continue to look for convenient retail in a blended brick and mortar/online format, but will demand a unique dining, shopping or entertainment experience. If bricks and mortar cannot provide this in a fluid and flexible format, this consumer group will continue to increase their tendency to shop online.
These uses include chef-driven concepts like Superica, Barcelona, JCT Kitchen, The Optimist, BeetleCat, Heirloom BBQ and Breadwinner, as well as unique fashion brands like Factory Girls and lululemon athletica. Millennials are also looking for multi-format entertainment venues like Movie Tavern, Slingshot, Main Event, Escape Room and Sky Diving, as well as specialty fitness concepts like Orange Theory, Flywheel, CrossFit and Pure Barre, all with a seamless integration with social media.
The challenge for retailers and developers will be in staying ahead of a constantly evolving Millennial consumer base by turning merchandise quicker, using technology to reach the consumer more effectively and changing menu items with frequency, all in an environment that provides a sense of fun and theater.
Regardless of age, race or income, there is a strong desire for a sense of community, familiarity, comfort, sense of belonging and prideful support. Local communities who have successfully accomplished this include Roswell, Vinings and Woodstock. In fact, if you have been to downtown Roswell on a Saturday night recently, you have seen a vibrant, walkable community that transcends age, race and income. Communities such as Sandy Springs, Suwanee, and certainly the developments along the Beltline are also creating similar experiences for their local and visiting consumers.
Can You Handle the Truth?
Bricks and mortar retail is alive and well in Atlanta. Provided supply and demand fundamentals are in balance, bricks and mortar will continue to thrive as long as retailers and landlords are creative and nimble and offer consumers what they are looking for.
— By Jonathan Dubovsky, Partner, The Shopping Center Group. This article originally appeared in the October 2016 issue of Southeast Real Estate Business.