Market InformationAtlanta Office Market Overview
April 2008An overall air of uncertainty hovers throughout the economy as some call it a recession and others won't concede that it is. Housing prices are falling; food and energy costs are rising; and consumers are cutting back. The one consistent phrase over the past year has been that office tenants have choices because there's lots of available space. That's definitely true as overall office vacancy stands at 18.9%. But, choice also translates into indecision, a shift towards staying in place with reduced renewal rates to wait out the economy, or a move that involves less space than previous locations. It may be a prime time to lock in attractive space at below market rates, but it only makes sense if it is affordable within the entire realm of the business. Just because the deals are there, does not mean that the tenant wants to or can afford to make a move. In some cases, the choice has been between the landlords, who have varied from the extremists that have refused to rent their space at realistic market rates rather than their desired pro forma rate, to the owners, who are aggressively seeking deals by buying out existing leases, offering moving concessions, free rent and build out allowances. As the housing market slides and companies start a series of layoffs, only the landlords with very deep pockets will be able to wait out the market. Most will need to generate some kind of income from their properties. It is truly a tenant's market right now when viewed through the prism of vacancy rates. Availability is still rising; but the options have increased dramatically as landlords now push any vacant space, even those large blocks that they wouldn't have considered subdividing in the past. Large commitments just aren't happening. And with the economy likely to stay stagnant while the presidential race unfolds, rental rates will have to come down to entice tenants into committing to new leases .Atlanta Industrial Market Overview
April 2008Atlanta has always been a distribution town. That accounts in part for why investors see the industrial market as being relatively decent in the upcoming year, more so than office or retail. Still, being decent doesn't mean all that much if the economy continues to slide into a recession. Unemployment is not as big a factor in industrial properties since most are distribution warehouses rather than manufacturing facilities. But, make no mistake; even the industrial sector is feeling effects from recent economic news. As the residential market slows, so does the retail market. And, as retail slows, so does the need to store and transport goods. Atlanta does not usually suffer to the extremes of other markets. But, it has its own specific problems with severe traffic issues that add significantly to fuel and other transportation costs. Atlanta's industrial vacancy actually dropped at year end 2007, down to 14.8%. That entire shift occurred in the distribution market. The business service market, which tends to be heavy office, rose significantly. On the positive side, construction starts are slowing, thus giving the market a chance to catch up after the record surge of construction starts over the last couple of years. Unlike the office market, rental rates in industrial space have been dropping in response to the increasing availability of the past two years . Atlanta Retail Market Overview
April 2008With no natural boundaries, Atlanta continues to expand ever outward beyond its traditional perimeter. Residential growth always starts the next circle of development. Retail follows. In the past this meant large, giant grocery store-anchored strip centers and massive malls, all located on the same major artery heading into the next county. Traffic woes created a reverse surge of residential and retail development inwards toward Downtown, Midtown and even the Perimeter, the area once considered the outer edge, but one that is now almost as dense as Midtown. Traffic woes are having a similar effect in the outer ring. Retail centers are responding to a trend against high traffic centers, establishing a smaller, yet potent presence on secondary roads in outlying areas. The combination of traffic snarls and rising gasoline prices thus has started a shift towards greater acceptance of live-work-play environments, not just in the inner city, but also in the outlying suburbs as well. Whether Atlanta, known for its car-centered focus, does truly stick to this shift remains to be seen. This retail growth is tempered somewhat by the slumping housing market and the sluggish economy. Consumers are cutting back on spending, primarily due to rising energy and food costs. They will continue to spend, but it will be where they perceive real values. That means that the essential retail--the drug stores, the grocery stores and the general merchandise stores--are going to be where consumers will be shopping during the first half of 2008 . |
