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Metro Atlanta’s Multifamily Market Poised for Growth Despite Construction Costs

John Nelson — Mon, 07 Jan 2019 12:37:11 +0000

Driven by continued job and population growth, metro Atlanta’s multifamily market remains strong. Rarely a week goes by without an announcement of another corporate relocation or expansion somewhere throughout the metro area. This, in addition to an increasing population seeking the region’s quality of life, relative affordability and dynamic economy, has sustained the current cycle of development in the multifamily market. Investors appear to share this conclusion and have made Atlanta a top destination for acquisitions over the past several years. Despite some potential challenges on the horizon, namely rising construction costs, metro Atlanta’s apartment market is poised to continue its expansion over the near term. Market Fundamentals While new supply has outpaced absorption, most data providers still show metro Atlanta’s overall occupancy rate above 94 percent. Many market observers estimate that the multifamily market is on the cusp of, or has just moved past, its short-term peak of deliveries. Spiraling land and construction costs, coupled with the current labor shortage being felt across the economy, are acting governors of future supply expansion. These increases in costs are also translating into much higher required rents, which are testing the size of the renter pool capable of affording them. Despite concerns…

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Office Redevelopments, Leasing Key to Downtown Atlanta’s Re-emergence

John Nelson — Mon, 31 Dec 2018 18:32:20 +0000

The vitality of Downtown Atlanta is exciting. In response to a wave of revitalization efforts and substantial investment from corporations, universities and the public sector, the submarket’s fundamentals are rapidly strengthening. As tenants have reprioritized their desires for office locations to include access to public transportation, walkable retail and proximity to cultural attractions and an educated workforce, Downtown has gained tremendous traction in demand and re-emerged as an affordable and authentic urban work setting. Model Project: 100 Peachtree While new development activity is primarily focused on housing, much of the bustle in Downtown Atlanta’s office market is focused on redevelopment, renovations and repositioning. For instance, our team is transforming 100 Peachtree, a 32-story office tower, into a modern, transportation-oriented workplace destination with upgraded amenities, enhanced connectivity with Woodruff Park and new community activations. 100 Peachtree’s timeless Meisian design functionality provides a workplace for tenants ranging from traditional corporate headquarters to tech startups. Changes at 100 Peachtree reflect a broader story about shifting expectations for workplace environments. Employees increasingly desire to work at a “go-to” office building with access to transit in an amenity-rich setting. Office amenities have evolved from providing convenience like a café or sundry shop to blurring the…

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Retailers Attracted to Atlanta’s Mixed-Use Projects, Infill Locations

John Nelson — Mon, 24 Dec 2018 12:26:31 +0000

If we had to sum up the 2018 Atlanta retail environment with a single word, it would be “change.” Atlanta’s builders have turned away from the traditional suburban models in favor of modern mixed-use developments featuring high-end office and residential units on the upper floors, along with street-level retail shops. Many planners see such projects as a means of creating more walkable, safe and vibrant neighborhoods. Retailers are drawn to intown opportunities such as Modera by Mill Creek’s mixed-use apartment communities (existing locations in Midtown, Sandy Springs and Vinings, with Reynoldstown coming soon), or Revel, a planned $900 million, 118-acre mixed-use and entertainment destination being developed by North American Properties in Duluth in Gwinnett County. With a limited supply of real estate inventory for shops and restaurants and the continued demand from new concepts entering or growing in the Atlanta metro market, the competition for space has grown fierce. For example, Franklin Street’s client City Barbeque waited 18 months for a premier location to become available for its new eatery in Johns Creek. The restaurant group made a lease agreement offer within three days of the prior tenant going dark to secure the spot before other bidders could jump in.…

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Historically Low Vacancy, Port Growth Drive Savannah’s Industrial Development

John Nelson — Mon, 17 Dec 2018 12:22:05 +0000

Though Savannah by all standards is a small industrial market, you would never know it from the activity in the area. At 57 million square feet, the port city is poised to add an astounding 9.75 million square feet of inventory by mid-2019. The force behind all of this growth is attributed to one key factor: The Georgia Ports Authority (GPA). The GPA is an economic giant in Georgia supporting one of every 11 jobs in the state and accounting for 8 percent of its GDP. Home to the largest single-container terminal in North America, GPA moved more than 4.2 million TEUs (20-foot equivalent units) in fiscal year 2018, an 8 percent increase over 2017 and an all-time record for the port. With both CSX and Norfolk Southern on terminal, GPA also handled a record 435,000 rail lifts in FY 2018, which was a 16.1 percent increase over 2017. As the fastest growing port in the country, one might be concerned about congestion becoming an issue for the port, but reinvestment remains a top priority. The GPA recently opened its second inland port to move more containers toward population centers via CSX rail. It doesn’t hurt either that Savannah, geographically…

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Tech, Film Industries Help Atlanta Sustain Retail Growth Intown and in Suburbs

John Nelson — Mon, 16 Jul 2018 11:30:07 +0000

“How long will Atlanta’s retail boom last?” That is the multibillion-dollar question everyone in the market is asking themselves. Nobody knows for sure, although there are many valid reasons to think that Atlanta will sustain its growth through 2018 and beyond. The state of Georgia has placed a strong emphasis on drawing technology companies to the state, and Atlanta’s tech boom has catapulted the city to the front of the race for Amazon’s $5 billion HQ2 project. The city already boasts the world’s busiest airport, which makes it easy for any company to relocate here because they can directly connect to anywhere in the world. Most recently, Facebook announced it will build a sprawling data center campus at Stanton Springs, about 40 miles east of Atlanta, and NCR Corp. recently opened its new headquarters campus in Midtown. The emerging tech community includes startup hubs such as Atlanta Tech Village, Switchyards Downtown Club, the upcoming Coda project at Tech Square and Advanced Technology Development Center, an affiliate of Georgia Tech. With elite local colleges like Georgia Tech, Emory University and the state’s flagship school, the University of Georgia, about 60 miles east in Athens rapidly producing new graduates, the city is…

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Booming Atlanta Industrial Market Continues Surge Thanks to E-Commerce

John Nelson — Mon, 09 Jul 2018 11:30:07 +0000

Atlanta is the logistics hub and economic engine of the Southeast, which is the fastest growing region in the country. Its 700 million square feet of industrial space makes it the fifth largest logistics market in the United States. Traditionally, population and job growth are key drivers of industrial demand, and Atlanta has had strong growth in each. The metro added 78,000 people in 2017, or nearly 214 new residents every day, which is reminiscent of the solid population growth of the 1990s when Atlanta averaged nearly 100,000 new residents every year. Additionally, Atlanta has had solid job growth, growing 2.5 percent last year, second only to Dallas/Fort Worth among the 12 largest metro areas in the U.S. E-commerce has caused a surge in demand for industrial space that has benefitted the Atlanta industrial market. Online retail sales now make up over 9 percent of total retail sales, according to the U.S. Census Bureau, up from 5 percent in 2012. A recent report from Cushman & Wakefield stated that while e-commerce accounted for just 5 percent of leases in 2013, it now commands over 20 percent of all warehouse leasing. As Amazon and others ramp up delivery times from two-day…

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KDC Underway on Phase II of Park Center Office Campus in Central Perimeter

John Nelson — Mon, 02 Jul 2018 11:30:30 +0000

Park Center is the largest ground-up corporate office project in metro Atlanta’s history. In early 2017, KDC broke ground on Park Center Phase II, which consists of two office towers totaling 1.1 million square feet, including approximately 40,000 square feet of retail space. The office towers will be leased by State Farm, which also leased the 21-story office tower in Phase I. Phase II of Park Center started with the implosion of the existing 240,000-square-foot, 10-story Hammond Exchange building on March 4, 2017. The remainder of 2017 was spent removing the debris from the implosion, blasting and removing over 300,000 cubic yards of rock, site grading, relocation and placement of utilities, and installation of tower cranes. In addition, construction started on the parking structure and building pad for Building 2. Several large culverts were constructed for a new road that will connect Perimeter Parkway in Dunwoody to Peachtree Dunwoody Road in Sandy Springs. Today, seven of the 11 parking levels of Building 2 have been poured, including the lobby level and vehicular-pedestrian plaza in front of it. Completion of the 660,000-square-foot, 22-story Building 2 is slated for the end of 2019. Work is also taking place on Building 3, including…

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Portman Holdings Secures $150M Construction Financing for Office Tower in Midtown Atlanta

Nellie Day — Wed, 31 Jan 2018 13:00:28 +0000

ATLANTA — Portman Holdings has secured $150 million in financing to build a 21-story office building in Atlanta’s Technology Square. The 352,000-square-foot, build-to-suit Anthem Technology Center will be situated near Georgia Tech in Midtown. This area is known as an innovation hotbed with research facilities, incubators, technology start-ups and the Georgia Institute of Technology campus. Healthcare insurance giant Anthem (NYSE: ANTM) will occupy the space. The offices will serve as a hub for approximately 3,000 IT professionals seeking to enhance consumer healthcare experiences, improve the quality of care and lower healthcare costs. The building will feature a 14,000-square-foot terrace area with green space. Anthem placed an emphasis on energy and water efficiency, indoor environmental quality and active design standards. The building will also include 7,000 square feet of retail space and alternating two-story spaces connected by a staircase to promote collaboration. The project’s groundbreaking is scheduled for Feb. 21. Construction is expected to take two years. John Portman & Associates designed the building for Anthem. PCCP contributed equity financing, while SunTrust acted as the lead lender. Regions also served as a lender for the project. SunTrust will open a full-service branch inside Anthem Technology Center. Atlanta-based Portman Holdings is a…

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Demand for Live-Work-Play Fueling Global Interest in Atlanta Multifamily Market

John Nelson — Mon, 04 Dec 2017 12:45:47 +0000

With Atlanta’s economy more robust than ever, demand for multifamily housing remains high, driving rent growth and investor interest throughout the market. Since the last cycle — when a reliance on construction hit hard — the city has transformed its economy by building up its IT, healthcare and automotive sectors, among others. The results of strong job growth and the diversification of employment are evident market-wide. In particular, Buckhead and Midtown have seen a substantial increase in multifamily supply over the last three to five years, as spillover activity in East Atlanta and West Midtown will continue. And the rise of two multibillion-dollar sports stadiums (Mercedes-Benz Stadium and SunTrust Park) in the same year — a first for the city — continues to draw national and international attention to intown and metro submarkets. Urban Goes Suburban A seemingly insatiable demand for urban live-work-play settings has inspired developers to replicate the highly-amenitized and high-rent success in the suburbs. Alpharetta’s Avalon was a game changer, spurring destinations in John’s Creek, Gwinnett County’s Peachtree Corners and the mixed-use boon around SunTrust Park in Cobb County. So far, development activity has been steady in the northern submarkets, with little activity on Atlanta’s south side.…

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Creative Office Space Fuels Growth in the Already Robust Atlanta Market

John Nelson — Mon, 27 Nov 2017 12:45:11 +0000

Although so-called “creative office space” is for now a tiny slice of the overall supply in Atlanta, it represents the most significant change in the use of office space in generations. Tenants and landlords have only begun to use creative design principles to push rents past levels previously thought unreachable, while increasing worker productivity and satisfaction. Trends in this sector will define the American workplace for decades. The largest users of creative office space — also commonly referred to as loft office space — today are in the TAMI sector (tech, advertising, media and information), but law practices, engineering firms and others are also embracing the open office concept. In Atlanta, there is 3 million square feet of creative office space, which is only 1.2 percent of the metro area’s total inventory. But the vacancy rate for creative spaces is just 8.3 percent and the gross asking price is $29.90 per square foot, both considerably outperforming the traditional office arena. Since 2013 the asking rate for traditional office space in Atlanta has grown 17.2 percent. For creative space the asking rate has shot up 62.5 percent. The top end asking rate for creative spaces is more than $6.50 higher than…

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Atlanta’s Disciplined Retail Market Ready to Face Headwinds from REITs, Amazon

John Nelson — Mon, 20 Nov 2017 12:45:55 +0000

A decade ago, the Atlanta retail market was a house of cards. It was clear to see this if you were in the industry at the time, and possibly even if you weren’t. Based on the intense overbuilding that had taken place, it wouldn’t have taken a worldwide economic meltdown to wreck it, though that didn’t help. Literally hundreds of unanchored retail centers had cropped up all over suburbia, fitting directly into everything that people consider to be negative about shopping centers. The formula for developers was to scrape every tree from a piece of land, cover it with asphalt and an inexpensively constructed building, then fill it with whatever tenants they could find. The result was largely a glut of properties with poor intrinsic values: mid-block sites, odd shaped layouts, challenging access, uninspired, non-credit tenants with high rents. This would, of course, turn out to be unsustainable. To be fair, not every property was developed in this fashion. Atlanta was and still is home to many excellent retail developers that know how to create amazing projects. But many look back to the 2000s in Atlanta as a time of cookie cutter development with inexperienced builders playing a game of…

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Independence Realty Trust to Acquire Nine-Property Multifamily Portfolio for $228.1M

Nellie Day — Wed, 06 Sep 2017 12:00:23 +0000

PHILADELPHIA — Independence Realty Trust Inc. (NYSE: IRT) has agreed to acquire a nine-property multifamily portfolio for $228.1 million. The portfolio contains 2,353 units across the U.S. The seller was not disclosed. This acquisition will allow IRT to further develop its presence in core markets like Atlanta, Indianapolis and Columbus, Ohio. It will also allow the REIT to enter two new markets, though further information regarding the assets’ locations was not disclosed. IRT maintains a large multifamily portfolio in the South and Midwest, particularly in Arkansas, Georgia, Florida, Kentucky, Missouri, North Carolina, Oklahoma, Tennessee and Texas. Rents range from $455 per month at Raindance Apartments in Oklahoma City to more than $1,265 per month at Sabal Key in Naples, Fla. The communities within the new portfolio were built or renovated between 2000 and 2011 and feature an average occupancy of 95 percent. Average effective rent per unit was $884 for the three months that ended July 31, 2017. “This acquisition represents another key milestone for IRT, bolstering our current portfolio with a collection of high-quality communities located in amenity-rich, non-gateway markets that are core to our investment thesis,” says Scott Schaeffer, chairman and CEO of IRT. “This is a tremendous…

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Atlanta Multifamily Market Continues Strong Performance in All Asset Classes

John Nelson — Mon, 24 Jul 2017 11:45:31 +0000

In 2016 and the first quarter of this year, Atlanta’s economy boomed, showing several positive signs that point to another banner year for the multifamily market. From December 2016 through February 2017, Atlanta added 96,700 total non-farm jobs, an increase of 3.7 percent over the same time the previous year. Additionally, in 2016 the city experienced 3 percent wage growth overall. This translates to a robust multifamily market with solid fundamentals. According to Axiometrics, Atlanta’s average effective rent broke the $1,000 ceiling in second-quarter 2016 and has not stopped climbing since, reaching $1,068 as of first-quarter 2017. Rents are projected to increase by just under 5 percent in 2017. While the market’s rent growth rate is slowing, we cannot forget that Atlanta is breaking historical rent records while maintaining an occupancy rate in the 94 percent range for the last 11 consecutive quarters. Throughout the city, all asset classes — from Class C suburban properties to trophy Class A properties in the urban core — are posting strong performances. One trend we are keeping an eye on is single-family development, which is starting to come back as rental rates continue to rise and renters look to make a more permanent…

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Atlanta’s Office Market Continues to Thrive, Though a Test Looms on the Horizon

John Nelson — Mon, 17 Jul 2017 11:43:00 +0000

It is no secret that Atlanta has been a booming market in the post-recession era. Metro Atlanta added more than 85,000 jobs in 2016, while the unemployment rate has dropped to 4.9 percent, back to a prerecession level (2007). Atlanta has ranked near the top of the largest 10 office markets in annual job growth, outpacing the likes of New York, Los Angles and Chicago. There was 3.3 percent job growth in 2016, outpaced by only one large metropolitan peer, Dallas-Fort Worth. Rent Growth The Atlanta office market has shared this success as rents have continued to climb to record levels and vacancy levels have dropped. Since the end of 2012, overall gross asking rents have risen 22.1 percent, or $4.41 per square foot. Thanks to major relocations by companies such as Honeywell, GE Digital and Synovus, and major expansions by Kaiser Permanente, Sage, Anthem and Kabbage, among others, Atlanta’s overall office vacancy rate has plummeted 540 basis points from the end of 2012 (from 22.3 percent to 16.9 percent in the first quarter of 2017). Construction With market fundamentals in a stronger state than at any other time in recent history, the introduction of new product presents a litmus…

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Atlanta Industrial Market’s Record Performance Drives Investment Demand

John Nelson — Mon, 10 Jul 2017 11:45:15 +0000

The Atlanta industrial market continues to grow in popularity when it comes to real estate investors’ appetite. Industrial assets are “hot items” in current investment sales transactions as the region’s economic momentum continues to position Atlanta as one of the healthiest industrial markets in the Southeast. Some of the major local and macro-economic trends affecting the industrial market include the ongoing growth of infrastructure, logistics and manufacturing industries. Furthermore, the Port of Savannah’s new Post Panamax facilities, its ongoing investment and expansion plans and its increasing activity are also beneficial to the Atlanta industrial market. Investment sales professionals, especially individual investors, remain attracted to Atlanta’s industrial market as e-commerce continues to transform how and where products are stored and shipped, not to mention the simplicity of owning and managing industrial properties, compared to retail and office. In 2016, the Atlanta industrial market experienced over 17 million square feet of net absorption. The forecasted absorption for 2017 ranges between 12 and 14 million square feet, with approximately 12 million square feet of new product being delivered this year. Over 90 percent of the new product comprises warehouse/distribution product, and less than 10 percent consists of new flex and shallow-bay buildings. Most…

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Retailers are Seizing the Opportunity to Backfill Shuttered Stores in Atlanta

John Nelson — Mon, 03 Jul 2017 12:00:56 +0000

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…

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Atlanta’s Office Market Experiencing Positively Boring, Safe Growth

John Nelson — Mon, 16 Jan 2017 12:45:54 +0000

The Atlanta office market has continued down a path of steady recovery and absorption, although the pace remains somewhat muted from prior recovery cycles. As outside investors have warmed up to the city of Atlanta, they have been comforted by a safe and positively boring period of growth. For the last couple of years, investors have been committed strongly to value-add opportunities throughout metropolitan Atlanta, including areas that have historically been out of favor like Alpharetta and Peachtree Corners. The fundamental improvements in the market rents and occupancy continue to support bullish forecasts for office space in Atlanta with significantly low vacancy and steady rent growth. Atlanta’s office market sits at 12.1 percent vacancy, 6 percent rent growth and 3.6 million square feet of positive net absorption after several years of consistent absorption and falling vacancy. With value-add being a buzz word throughout the Southeast, many investment sales brokers have taken core assets and found ways to present them as opportunities for value-add in an effort to reach a larger pool of investors. Investor appetite continues to be measured and very focused on downside risk versus upside potential. This has inflated the return expectations for very solid real estate, making…

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Retailers Try to Keep Up With Atlanta’s Dynamic Consumer Population

John Nelson — Mon, 09 Jan 2017 12:45:16 +0000

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,…

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Mid-America Apartment Communities to Acquire Post Properties in $4B Multifamily REIT Merger

Nellie Day — Mon, 15 Aug 2016 12:00:32 +0000

MEMPHIS, TENN., AND ATLANTA — Mid-America Apartment Communities (NYSE: MAA) has agreed to acquire Post Properties (NYSE: PPS) in an all-stock deal that values Post, a developer and operator of upscale multifamily communities, at nearly $4 billion. The merger will create a Sunbelt-focused, publicly traded multifamily REIT. The acquisition brings together two multifamily portfolios totaling approximately 105,000 multifamily units in 317 properties. The combined company plans to focus on urban and suburban locations in large and secondary markets within the Sunbelt region, which stretches from coast to coast along the southern United States. The combined company’s 10 largest markets by unit count will be Atlanta; Dallas, Fort Worth, Austin and Houston, Texas; Charlotte and Raleigh, N.C.; Orlando and Tampa, Fla.; and Washington, DC. Each share of Post common stock will be converted into 0.71 shares of newly issued MAA common stock, per the agreement. Former MAA equity holders will maintain about 67.7 percent of the combined company’s equity, while former Post equity holders will hold the remaining 32.3 percent on a pro-forma basis. The all-stock merger is intended to be a tax-deferred transaction. The combined company is expected to have a pro-forma equity market capitalization of about $12 billion, as…

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Adidas to Open Shoe Factory in Metro Atlanta, Move Production from Asia

Haisten Willis — Wed, 10 Aug 2016 12:00:04 +0000

ATLANTA — German sportswear brand Adidas has announced plans to open a new footwear production site in the Atlanta area in 2017, eventually bringing part of the company’s manufacturing from Asia to the United States. The facility, which will be known as adidas Speedfactory, is designed to allow the company to create products more quickly and closer to U.S. consumers using a highly automated process. The 74,000-square-foot facility will be located in Cherokee County, a suburban area roughly 30 miles northwest of Atlanta. It is scheduled to open in the second half of 2017 and will produce 50,000 pairs of shoes a year while employing 160. The U.S. factory will complement another Speedfactory facility operating in Germany. Adidas’ strategic partner Oechsler will operate both the U.S. and German facilities. Adidas is headquartered in a small town in Bavaria. The company is publicly traded on the Frankfurt Stock Exchange under the symbol ADS. Its parent company, Adidas Group, includes several other sports-goods brands such as Reebok and TaylorMade. — Haisten Willis

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