Job Growth Is Slowing, Supply Is Growing, But Atlanta Developers Are Still Bullish For 2020
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Headwinds are blowing into Atlanta's economy. Just don't tell that to the city's commercial real estate industry.
Metro Atlanta's rocketing job growth has slowed in recent years, from more than 4% in 2014 to 1.5% in August, in line with the overall U.S. job growth rate. And while the metro area is expected to generate 51,200 new jobs this year, that rate is projected to drop by more than 10,000 next year, according to Georgia State University's Economic Forecasting Center.
“Chalk it up to the ongoing global slowdown in Europe and Latin America, coupled with our trade spat with China and a weakening domestic investment climate,” GSU Economic Forecasting Center Director Rajeev Dhawan said in a release. “Global and domestic headwinds are buffeting Georgia’s catalyst sectors, making for an overall lower future growth path.”
GSU projects Atlanta's economy will add 38,100 new jobs in 2020, only 7,800 of which would be office-based positions.
Job growth is a critical data point for the commercial real estate industry. The more jobs that are produced, the more office space can be leased, the more apartments can be rented and the more customers there are to shop and spend.
But that is not dampening the outlook of commercial real estate veterans for next year.
“No. Not in 2020,” JPX Works founding principal Jarel Portman said when asked if an economic slowdown is on the horizon for Metro Atlanta. “I'm still bullish. I don't really see any slowdown. The banks are still lending, equity is still available.
“I just think there are so many jobs, and Atlanta is on a healthy trajectory even if there were a recession. To me, it would be the guy trying to land a plane for the first time: [He] goes down and hits the ground and bounces right back up again,” Portman said.
Portman, the son of the legendary architect and developer John Portman, will be among the panelists at Bisnow's Atlanta 2020 Forecast, which will have some of the biggest names in commercial real estate pontificating where Metro Atlanta could be headed in the new year, especially as the U.S. is in the longest period of economic expansion in its modern history.
Under Portman's leadership, JPX Works has already developed two apartment communities in Atlanta: Lilli Midtown and Inman Quarter. While its efforts to develop an ultra-luxury condo tower in Buckhead fell through, JPX Works is eyeing at least three more projects in the metro area, Portman said, although he declined to elaborate.
As of the third quarter, developers in Atlanta were underway with more than 8,000 new apartment units, according to Haddow & Co.
“We're definitely looking at two or three deals that we're excited about because we're still, strangely enough with all the multifamily built, the city still needs more,” he said.
Despite the projections of sluggish growth, the office sector appears to be taking the news in stride.
“There's really nothing on the horizon that suggests there's going to be a slowdown in Atlanta, barring any macroeconomic impact to the economy,” Piedmont Office Realty Executive Vice President George Wells said. “I just don't see much in terms of headwinds for Atlanta. Quite frankly, we're really big fans of Atlanta.”
Through the third quarter, office tenants absorbed more than 784K SF, putting the metro area on track for its strongest level of office demand since 2016, according to a recent Transwestern report.
“Atlanta’s economy continues to outperform the nation, and its unemployment rate is at its lowest point in more than a decade,” Transwestern officials wrote in the report. “The metro area continues to attract relocations and Atlanta is one of the nation’s fastest-growing MSAs as a result. This is reflected in Atlanta’s office market, which continued to enjoy stable vacancy levels and rising rental rates, even as construction has increased around the metro area."
Transwestern Executive Managing Director Clark Dean said a big change to the metro area in this economic cycle has been the city's diversifying economy. Technology, fintech, healthcare, professional services and hospitality all grew in conjunction as companies looked to tap into Atlanta's talent pool, especially of younger millennials and college graduates. That has led to a number of companies opening new offices in Atlanta, Dean said.
“I'm an optimist and I'm an economic development guy,” Dean said. “The companies that I am talking to who are looking at Atlanta, they are companies that may never have had an employee here in Georgia, and now may have hundreds of employees here. I think the office sector is strong because real estate is about people, people, people. People thought it was about location, location, location at one time.”