The Rich History and Dynamic Development of Atlanta
A rising tide lifts all boats, said Jay O’Meara, senior vice president with CBRE in Atlanta, about the Atlanta market, and strong fundamentals are yielding positive rent growth in the CBD and in the submarkets that surround the city. O’Meara presented to the NAIOP Board of Directors at the National Forums Symposium 2016, May 4, in Atlanta.
Atlanta is an old railroad town, and was shaped by its strategic location as a major transportation hub. It’s the heart of the southeast – an SEC and ACC melting pot for the sports fanatics. There are lots of corporate and personal relocations to the city, and the job market is regaining strength after the Great Recession. Atlanta’s Hartsfield–Jackson Atlanta International Airport is the busiest in the world – companies enjoy that employees and clients can get anywhere and everywhere quickly.
It is hard to define Atlanta: It’s a logistics town, a retail town, the largest economy in the southeast, and a healthy mix of service industry and white-collar jobs. Eighteen Fortune 500 companies are located here, and many more are on their way.
New tenants in town include NCR, which is moving its headquarters to Midtown. Comcast is building right next to the new Braves stadium in Smyrna – creating the most “wired” sports facility in the world. Mercedes Benz relocated their headquarters here last year, bringing 1,000 jobs and a major tailwind affect. Kaiser Permanente, Norfolk Southern, Sage and Level 3 Communications are just a few of the companies expanding here and driving job growth and real estate demand.
The office market is steady, absorption is up (3.0 million square feet since Q1 2015) and rent growth is up 13 percent. There’s not much office in development right now – only 2 million square feet, or roughly 1 percent of the office market. Today, the market boasts 14 percent vacancy and the average rent is $24.86.
Office sales last year hit $4 billion – and that’s comparable to 2006-2007. Has the market finally returned to pre-recession levels? Atlanta has a diverse group of current owners, even with the recent merger of Cousins Properties and Parkway Properties, which were the number two and three owners in the market.
What types of buyers are active in the market? Of the top 25 transactions last year, 37 percent were by larger funds and 26 percent were private capital. REITs represent 17 percent and foreign capital represents 10 percent. Although the city is not a gateway to foreign capital, it’s a multinational town that attracts investors from across the globe.
The new Braves stadium is spurring tons of development around the venue, with 400,000 square feet of retail, lots of new restaurants, and even office to support companies and corporations affiliated with the team and related businesses. The location of the stadium and the surrounding development prove that the suburbs aren’t dead. Making suburban offices amenity rich is the key – companies want to be in some suburban markets and, despite the perception, even millennials want to live there.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.
Atlanta has also seen an influx of multiple shared office space providers in the last five years. The majority of people looking for office space need less than 1500 S/F. The traditional landlords often don’t have much to offer in that size range. A few years ago there were only a few choices for shared office space & coworking. There are now over a dozen to choose from. It would appear to me the traditional landlords are going to have a hard time competing for this business. With the shared office space providers you can move into your office tomorrow. With a traditional landlord it can take months.