WHO'S ON FIRST?
|One of Atlanta's biggest landlords says Midtown is poised to improve before Buckhead, which will put a drag on the whole commercial real estate market during the recovery.|
That landlord is Ackerman & Co's Kris Miller, who spoke at the firm's annual investor conference Monday at the Capital City Club. We've been camped out there for two days taking copious notes. (The invitation-only event attracted more than 100 real estate andfinance pros.) Kris says Midtown has the history of dynamic absorption that will cause its record vacancy to decline over the next few years. Midtown has more than 21% of vacancy, but landlords could see that number to less than 17% in three years, perhaps even below 14% if the market returns to historic absorption and no new development. Buckhead faces an even greaterchallenge, Kris says: a 24% vacancy and a historic absorption level somewhat less than Midtown. Net positive absorption was 237K SF last year. ?If it continues at that level, we will still be around 20% at the end of 2013," he says. "Long term, we like the Buckhead market. It's just going to take a while to absorb the new supply additions."
|Coro Realty Advisors' John Lundeen says in-town retail may be a good bet (as contrary to common sense as that may seem to some): ?Some of the in-town markets, Midtown especially, there's demand for some more.? He's seeing new retail anchors scouting Atlanta, taking advantage of the depressed real estate market to enter the competitive fray. Kris echoed some of the positive sentiment on retail real estate in Atlanta (which absorbed 316,800 SF last year), with a caveat: investments need to be focused on the best centerswith strong land fundamentals. ?We're thinking that retail, by the end of year three, will look pretty good,? he says. |
|Atlanta's office market hasn't quite hit bottom. That's the message from popular local economist Dr. Roger Tutterow of Mercer University. He says companies haven't given up on giving up space. ?My belief is that vacancy rates will not peak until we're in the third quarter of this year, perhaps even the forth quarter.? The outlook for the economy is much better though. Still, with only 35,000 new jobs projected to be added to Atlanta's economy this year, Roger cautioned: ?It will not be 2011 or candidly even 2012 before things start to feel healthy again.?|
|Defying cliche, jobs are coming back to Atlanta from Mexico, according to John Woodward with the Metro Atlanta Chamber of Commerce. John's in charge of luring foreign investment to the metro area, and he says lately companies are actually exploring the possibility of returning manufacturing jobs to America: ?We're starting to have our phone ring and companies knocking on our doors saying, 'You know it's just not safe for our employees.'? The metro chamber's economic development team recruited 67 companies last year to move to Atlanta or expand, equating to about 4M SF of commercial space (a mix of both office and industrial) and $320M in new jobs.|
|The next major decade-long CRE growth cycle should begin in 2013 as recapitalization moves into high gear and more Baby Boomersretire, says Chris Lee with LA-based CEL & Associates. He says real estate consistently goes through 10-year cycles of rise, peak, and crash and then three to four years of transition where the industry wallows at the bottom of the market. And Chris says we're nearing the end of transition, which will lead to the next CRE rise and boom, fed on demographic shifts, healthcare, technology,energy, and knowledge-centered industries. The cycle should peak and crash again in 2018, and after another transition period, the real estate cycle after will likely focus on life sciences, artificial intelligence, and further demographic shifts as Gen Y ascends into economic prominence. Excuse us while we go rewatch Avatar for stock tips.|