ATLANTA — With a new year comes new predictions regarding the future of the commercial real estate market, and Atlanta is no exception. Georgia created 13,200 construction jobs from November 2012 to November 2013, according to the Associated General Contractors of America and the U.S. Labor Department. This is a good sign that development is not only back in Atlanta, but growing and bringing high-paying jobs to the region, says John Tennant, senior director for Franklin Street Real Estate Services. The company witnessed a 31 percent increase in revenue in 2013, and expects to continue that growth this year. Atlanta Commercial Properties (ACP) recently interviewed Tennant, who has more than 25 years of commercial real estate experience, to learn more about his insights on the state of the Atlanta market.
ACP: Briefly summarize the Atlanta commercial real estate market in the latter half of 2013.
Tennant: The Atlanta commercial real estate market experienced positive momentum in the fourth quarter of 2013. Multifamily development continues to lead the charge with several new large-scale projects adding more than 10,000 units across metro Atlanta.
The retail sector had encouraging signs with three large projects under construction: Oliver McMillan’s Buckhead Atlanta project; Jamestown Properties’ Ponce City Market; and North American Properties’ Avalon. Increased absorption by new retailers such as Sprouts Farmers Market, Conn’s Home Plus and Ollie’s Bargain Basement is allowing new ground-up development projects to move forward. Retail rents also experienced a strong recovery in the latter half of 2013, becoming more realistic with today’s market.
ACP: What trends do you foresee in Atlanta in 2014?
Tennant: Retail tenants will continue to reduce their store footprints as they work to find their “right size.” As big-box retailers shed this square footage, we will experience an influx of healthcare providers moving into those spaces. Landlords are becoming more lenient in allowing non-traditional retailers into their centers and healthcare tenants are looking to move from hospitals to these projects, which offer more parking spaces and are closer to their consumers. The Affordable Healthcare Act is a powerful force in continuing this trend as more healthcare providers enter the market.
The multifamily market will remain strong as employment continues to improve and Atlanta creates more jobs. We expect that infill, urban locations will remain the most popular among renters. However, as that space is leased up, we expect Class B and C properties in good locations to experience strong leasing and rent growth as well.
ACP: What sector of the real estate market is currently the most popular from an investment standpoint in Atlanta and why?
Tennant: Multifamily has experienced tremendous growth over the last 24 months and is expected to continue in 2014. Vibrant, walkable communities near downtown are highly desirable by investors and millennials in particular. These communities are drawing young, educated professionals who want to live closer to their offices to avoid long commuting times, while still having all their dining and entertainment options within close proximity.
ACP: Do you think Atlanta will witness much ground-up development in 2014?
Tennant: The 2014 commercial real estate market in Atlanta looks very promising. New ground-up development in the multifamily, office and retail sectors will be fueled by the continued improvement of the credit markets and job creation.
All eyes will be on downtown for the next few years as the new Falcons stadium moves forward and the Braves leave Atlanta proper. This will no doubt play a huge role in the commercial real estate markets in both stadium locations and have a strong economic impact. Download PDF