6 Outlooks on Atlanta Real Estate by 6 REITS
There are a number of views on the Atlanta real estate market. And most of them are very positive. A glimpse of this attitude has come in recent days during various REIT conference calls with analysts. We've run down some of the highlights.
1. Cousins Properties
Atlanta is the REIT's strongest market, CEO Larry Gellerstedt told analysts last week. During 2015, Cousins pushed 191 Peachtree to 91.5% leased, up 210 basis points from year-end 2014, and Terminus 200 fared even better, finishing the year at 92.2% leased, up 440 basis points.
Larry says the firm still has an opportunity for occupancy growth in Atlanta during 2016, specifically at Northpark Town Center (below) and American Cancer Society Center, two properties with the largest amount of vacancy in the company's portfolio.
While analysts probed Larry regarding any potential leasing velocity slowdown in markets outside of Houston, he measured expectations. “I would not say we've seen anything in our other markets that would indicate it yet, but we wouldn't be surprised if we start to see it in the balance of the year," he says. "But actually in Austin and Charlotte and Atlanta, the pipeline has come out pretty strong in 2016 in terms of leasing thus far.”
2. Post Properties
Officials say they see favorable conditions in Atlanta, Tampa, Orlando and even Dallas (Houston and Charlotte will struggle the most for rent growth). Post EVP Jamie Teabo says Atlanta will continue to be the top performer among the company's markets on a year-over-year revenue basis, and she sees that coming in around 4%.
Noting apartment rents in Midtown are being underwritten anywhere from $235 to $270 per SF, CEO Dave Stockert says the market in Downtown Atlanta—where Post just announced plans for Centennial Park (below)—is "candidly not as far along as a residential submarket, but it is coming.” He says the proximity to Midtown as well as transit access should encourage further investment in Downtown.
When asked about top rent growth moderating in Atlanta, Jamie notes there is more apartment construction and deliveries that are affecting that growth number. The occupancy is holding strong, she says, and the firm is getting 6% on the renewal side instead of 7.5%, and the new lease side, maybe down to 3% to 4% instead of 6%. "So it is just tempering the rent growth on a year-over-year basis, but the occupancy is still doing quite well," she says.
Aimco's Keith Kimmel says new apartment lease rates were particularly strong in Atlanta as well as San Diego, NYC and San Fran, with jumps between 6% and 12%. “Our steady performers, which had revenue growth of more than 5% to 7%, were San Diego, Atlanta and Greater Los Angeles,” he says, adding that Atlanta should see some of the strongest rent growth of all its markets of up to 12%.
Aimco's John Bezzant notes the company's May purchase of Mezzo (here), a 94-unit apartment project in Buckhead that it picked up for $38.3M, has seen good leasing since then, and is currently 89% leased at rents above underwriting.
4. CBL & Associates Properties
The retail REIT's Arbor Place mall has been a strong performer for the firm last year as well. CBL CEO Stephen Lebovitz says Arbor Place has been dominant in its trade area, even though Atlanta has a lot of malls. He see strong growth in Louisville and Atlanta, all while seeing good traffic on both leasing and sales.
5. Mid-America Apartment Communities
Atlanta has been a star performer for this apartment REIT as well, a market where it owns 17 properties, including Allure in Buckhead (here). COO Thomas Grimes says the vibrant job growth of the large markets is driving strong revenue results. He adds the firm expects to see job growth continue in those markets, with Atlanta, Orlando and Phoenix probably to perform at the top of that group.
6. Parkway Properties
Parkway's Jayson Lipsey (on right with Parkway's David O'Reilly and John Barton) touted strong leasing gains at the firm's recently purchased One and Two Buckhead Plaza. "We completed a total of 73k SF of leasing at the two properties during the [fourth] quarter, which included new leases that were executed at $40 per SF gross rate compared to the weighted average of gross in-place rent at the two assets of $31.50 per SF," Jayson says. "Leasing at these assets was highlighted by the successful completion of a 45k SF renewal of Raymond James at Two Buckhead, where we were able to unlock value by capitalizing on the positive mark-to-market."