Atlanta’s tremendous job growth from relocating and expanding companies has been particularly impactful during the metro’s expansion cycle, according to CBRE Research’s 2017 Southeast U.S. Real Estate Market Outlook. Atlanta’s tremendous growth is resulting in a dynamic, diverse economy better shielded from economic hiccups in any single industry sector, and is projected to be the most resilient market in the U.S. in the face of a potential recession.
As the national war for talent becomes more pronounced, Atlanta is in a good position to capitalize on its young, educated workforce and top universities such as Georgia Tech, Emory University and Georgia State University.
Capital improvements – investments in two new stadiums under development – have spurred further development, entertainment and infrastructure improvements.
Office
Atlanta finished 2016 with vacancy at its lowest point in 15 years and a record high asking rent. Solid fundamentals are leading to a significant amount of new construction, over 1.5 million sq. ft. of which is speculative space. Asking rents should continue to rise as new office product will demand higher rents, and strong leasing velocity is expected to continue with the growth of tech and insurance industries.
CBRE’s 2016 Scoring Tech Talent report highlighted Atlanta as a market that features two critical components for long-term growth in the tech industry: high educational attainment and affordability. This should bode well for the long-term sustainability of current rates of growth both in terms of attracting new companies to the market as well as organic growth to the 25 Fortune 1000 companies headquartered in the market.
The increasing competition for core assets in primary markets is shifting many investment firms, especially international ones, to consider Atlanta as a market that blends the stability found in the U.S. with the long-term growth prospects of being the largest office market in the Southeast. The report finds that Atlanta is an international gateway market, which, combined with Miami, accounts for more than 50% of the international commercial real estate investment activity in the Southeast.
Industrial
Atlanta is the distribution hub for the Southeast, with easy access to half of the U.S. population. Because of its accessibility, affordability and positive market conditions, Atlanta is emerging as the most desirable location for a distribution hub on the east coast.
Over the past three years, rent increases have been consistent but overall asking rents remain low compared to the rest of the country. As available space continues to dwindle, new development, both speculative and build-to-suit, remains strong. As speculative product hits the market, much-needed availability will be introduced back into the inventory. Consequently, space options for tenants will improve and an uptick in average rents is likely.
Retail
The national trend toward more urban and mixed-use retail is evident in Atlanta. The urban core has seen a significant amount of growth in recent years, supported in part by projects such as the Atlanta BeltLine, Ponce City Market, Avalon and upcoming developments 725 Ponce and The Battery at Suntrust Park.
Investor interest and the proven success of urban retail is raising the perception of Atlanta as a strong market for retail investment and development. As such, the retail market’s future in suburban and urban core areas should be bright.
Hotels
Atlanta has experienced significant increases in revenue per available room in recent years, sparking an increase in new development. Construction is concentrated in specific submarkets, such as I-85 North, Chamblee, Central Perimeter, Midtown and I-85 South near the airport.
In the next few years, Downtown’s hotel construction is anticipated to be active, with more than 1,400 new rooms in the development pipeline. Demand should increase Downtown as the city secures major sporting events like the Super Bowl in 2019 and the College Football Playoff National Championship game in 2018.
Multifamily
The 2017 outlook for Atlanta’s multifamily performance is bright as strong population and job growth continue to fuel a demand for multifamily options. Current development is focused on infill locations such as Buckhead and Midtown, rather than suburban markets in previous cycles. An influx of well-paying technology jobs should enable these infill developments to lease quickly.
A sharp reduction in new construction is expected in 2017 largely due to increases in land and construction prices, and a decrease in lending options. Assuming new construction remains in the projected range and oversupply does not become a factor, strong Atlanta fundamentals, combined with continued population and job growth indicate that Atlanta will remain a promising option for multifamily investment.
The Southeast U.S. Market Outlook Report is published by CBRE Research and provides an assessment on six commercial real estate sectors for the following markets:
· Southeast U.S.
· Atlanta, GA
· Birmingham, AL
· Charlotte, NC
· Charleston, SC
· Columbia, SC
· Broward County, FL
· Greenville-Spartanburg, SC
· Jacksonville, FL
· Memphis, TN
· Miami, FL
· Nashville, TN
· Orlando, FL
· Palm Beach, FL
· Savannah, GA
· Tampa, FL
To obtain other specific market reports, please click here: Southeast U.S. Real Estate Market Outlook 2017.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
