From farmland in the early 1970s to a major economic center in Georgia and the Southeast today, Central Perimeter has evolved into the dominant office submarket in metro Atlanta and an employment center larger than the downtowns of Nashville, Charlotte or Jacksonville. A corporate hub, Central Perimeter contains the headquarters of nearly 50 companies, including four that are Fortune 500s. During 2012, Central Perimeter also was the most active submarket in metro Atlanta, accounting for more than half of the region’s total office space absorption at 1.7 million square feet. The largest lease transaction in metro Atlanta in 2012 was in Perimeter. State Farm opened a new customer service center in nearly 500,000 square feet of space in two buildings in Dunwoody, which created 500 jobs. Metro Atlanta’s largest office sale in 2012 was the $300 million purchase of the 2.1 million-square-foot Concourse Corporate Center that includes the landmark King and Queen buildings. Additionally, Cox Enterprises added two buildings totaling 600,000 square feet to its Perimeter campus, delivering the largest office construction project last year. Central Perimeter is maintaining this strong activity in 2013, with State Farm leasing nearly 200,000 square feet of additional office space, adding 800 jobs. Also, …
Georgia
Overall, the Atlanta real estate market has continued to improve. Low interest rates have helped stabilize assets and attract new business, with manufacturing leading the way. At the end of first quarter 2012, CoStar Group reported the overall Atlanta industrial vacancy rate was 15.5 percent. For the same period ending in 2013, CoStar reported the vacancy had fallen to 12.7 percent. Those numbers have not come easy and are a true testament to the quality of Atlanta’s real estate brokers, landlords and owners who have shown a creative ability to solve problems and make deals. The past 12 months have been filled with exciting new project announcements, including build-to-suits. Among the companies that have announced construction projects include Baxter Healthcare, Porsche, PPG, Caterpillar, Hill Phoenix and Mitsubishi. Additionally, companies such as US Lumber, Subaru, American Building Supply, Atlanta Bonded, Carters and Decoster have recently expanded, filling existing vacancies in the market. While the list is impressive, we need more expansion from the existing industry. According to the U.S. Census Bureau, the population in Atlanta’s MSA was 5.4 million in 2012, which included 1.9 million households. STDB Online data service projects that the Atlanta MSA population will increase at an average …
The Atlanta metro has been named one of the top cities for job growth and the population is rising at one of the fastest paces in the country, creating high demand for rental housing that will persist. Last year, an average of 200 residents per day moved into the area, and nearly 21 percent of the entire metro population falls within the prime renter cohort, which includes people between 20 and 34 years old. Uncertainty in the housing market is driving up the age of the first-time homebuyer. As many young adults form rental households in lieu of ownership, they will likely choose to live in modern, luxury apartments near entertainment and business districts. Meanwhile, in the single-family market, permitting activity remains well below prerecession levels and sales of existing single-family homes are just 57 percent of peaks reached before the recession, confirming that many of these new residents are looking for rentals. Apartment construction is at an all-time low this year, and demand for units will outpace new supply by more than seven times. As a result, vacancy will fall to the lowest point in over a decade, allowing operators to boost rents and match prerecession peaks. Looking at …
Using the turtle and the hare metaphor, it is appropriate to associate Atlanta’s medical office market with the turtle and the metro area’s general office market with the hare. With a few exceptions, Atlanta’s medical office market has continued a slow and steady expansion during the last 30 years. While the size of the medical office market is substantially smaller than the general office market, it has not experienced the booms and busts that have plagued general office market over the same 30 year period. On-campus and Class A medical office buildings have consistently enjoyed 85 percent or greater occupancy. The primary difference in the stability of the two segments of office space is that the demand for general office is driven by the state of the overall economy, while demand for medical office is driven more by the health and size of the general population. Metro Atlanta’s population has increased by more than 51 percent since 1990. The last few years have seen slower growth in the medical office market primarily due to the unknowns of the Affordable Care Act law (Obama-care). Initially, there was uncertainty over whether the law would pass or not. After the law passed, then …
While the Savannah retail market has felt the impact of the recent economic downturn, the overall market has maintained its equilibrium, driven by key economic engines such as the Georgia Ports Authority/Port of Savannah, Fort Stewart, Hunter Army Airfield, the tourism industry and The Savannah College of Art and Design (SCAD). The Savannah Area Chamber and Visitors Center announced that June 2012 was a record-breaking month with 87 businesses joining the Chamber. Savannah also consistently makes top ten lists for best travel destinations. These constants have served as a steadying influence as various segments of the retail market have reacted and adapted to the evolving marketplace. Though downtown Savannah and the Historic District have seen property values decline during the last 36 months, the retail market has taken steps forward and backwards, and the general arc seems to be positive. Levy Jewelers, an upscale local jewelry store, has acquired a prime location at Broughton and Bull streets, the nexus of the main shopping district. Marc Jacobs Boutique and Urban Outfitters lead a list of national retailers that have set up shop in the downtown area. Whole Foods will mark its entry into the Savannah market with a 35,000-square-foot store at …
Savannah’s industrial market has a symbiotic relationship with the ships that navigate the city’s much-debated river channel. In the fiscal year of 2011, $54.1 billion in value and 8.7 percent of U.S. containerized cargo moved through the port of Savannah. This makes Savannah the fourth largest container port in the nation. The U.S. Army Corps of Engineers gave its final recommendation to deepen the channel to 47 feet and the president recently signed an executive order fast-tracking approvals by no later than November. This will keep the port competitive for larger Post-Panamax ships that will need to access the Savannah port after the Panama Canal is widened. The channel deepening project will not be completed prior to the completion of the Panama Canal widening, but Panama officials just announced the opening has been delayed by at least six months to April 2015. With port activity continuing to improve, so goes the area economy and warehouse occupancies. Market-wide, vacancy rates have ticked down to around 15 percent from highs in the low 20s just two years ago. There is a good supply of high-quality distribution space, thanks to the building boom started in 2005, which nearly doubled the inventory. There is …
Tenants and landlords forge into 2012 confronting many of the same challenges they had going into 2011. Atlanta’s office market still has a great deal of excess supply and demand remains below its pre-recession levels. The entire market has not pushed fully past concerns about properties with significant vacancy and looming debt obligations. Doubts about the broader economy also inhibit long-term strategic planning. The office market closed out 2011 largely unchanged from a year ago. The overall availability rate only fell by 1.1 pp from 26.5% to 25.4% over the course of the last four quarters. ““Vacancy rates remain high throughout the market and the vast majority of tenants have many options to choose from when negotiating leases,” says Andrew Lechter, executive vice president and branch manager of Studley Inc. The U.S. economy has shown signs of minimal gains in momentum and remains vulnerable to a sharp shock such as what has been called Europe’s “Lehman moment” or a spike in oil prices precipitated by a Mideast crisis. Some of the chronic problems that hampered U.S. growth – weak labor and housing markets – remain particularly acute in Atlanta and registered minimal improvement in 2011. Until employment and labor markets …
With low rental rates and available square footage, Atlanta’s industrial market remains a favorable environment for tenants and buyers interested in discounted real estate. Many are taking the opportunity to renegotiate leases on existing space or upgrade in terms of size, quality and location. With its close proximity to Hartsfield-Jackson Atlanta International Airport, CoStar Property reports South Atlanta’s Industrial Submarket is leading the metro area, with net absorption year-to-date in the third quarter of 2011 of 4.64 million square feet at an average quoted rental rate of $3.05 per square foot. The Northeast Atlanta submarket followed by posting year-to-date net absorption of 1.12 million square feet in the third quarter of 2011 at a higher quoted rental rates averaging $4.60 per square foot. Total year-to-date net absorption in the third quarter of 2011 for the metro area was 5.52 million square feet, with average quoted rental rates of $3.83 per square foot. This is in spite of the fact that flex space experienced negative net absorption, which accounts for approximately 10 percent of industrial inventory. The third quarter 2011 average vacancy rate of 13.3 percent has dropped relative to previous periods due in part to positive absorption and anemic new …
The Atlanta retail market took a slight hit in the second quarter of 2011, but is still seeing improvement. Although available space in areas is starting to fill up, absorption in the second quarter of 2011 fell from positive absorption of 648,692 square feet in the first quarter to negative absorption of 726,174 square feet, according to CoStar Group’s Mid-Year 2011 Atlanta Retail Report. However, the vacancy rate only rose slightly, from 10.1 percent to 10.4 percent. Greg Eisenman, associate with Colliers International’s Atlanta office and a member of the Retail Services Group, says many tenants are looking to do deals. While speculative development is on hold, he expects the available amount of space to drop. Tony Cerniglia, vice president of retail services with CB Richard Ellis’ Atlanta office, says recovery has been spotty, although there are pocketed areas of the city that are doing well. Buckhead, Midtown and Cobb County have seen the most traffic, which Cerniglia says is not surprising because of the solid demographics and good locations. Some retailers have even been competing for space in these markets. Cobb County has seen some leasing traffic. In fact, according to Colliers International’s Atlanta Retail Market Report, the two …
The writing was on the wall. Some read it; others ignored it. Regardless of the strategy, retail development came to a halt in 2008. A few single-tenant buildings were developed, but most ground-up projects went into a holding pattern. Two years later, most of those projects are still on hold or moving very slowly at best. From power centers and mixed-use developments to strip centers and grocery-anchored centers, development activity remains stagnant throughout the Peach State. Hardest hit are the secondary and tertiary markets where developers built shopping centers based primarily on residential growth projections. Unfortunately, those projected communities were never built. Many retailers in those markets have struggled, and some have closed their doors. As national retailers look for space again, shopping centers in those markets will be low on their list, furthering the decline of these centers. How Will Developers Survive? The old cliché — location, location, location — holds true. Developers with good projects in prime locations will make it through the cycle by adapting to the changing market conditions with the short-term focus on cash flow and long-term focus on value. However, several fundamental tactics are needed to survive this economic cycle: • Asset Stabilization: One …