FALL 2012 | RETAIL
ATLANTA
MARKET REPORT
Signs of Improvement for Atlanta’s Retail Market, but Vacancy Still Flat
Updated May 2012
MARKET INDICATORS
VACANCY
FALL 2012*
SPRING ‘13 Proj.*
—
—
NET ABSORPTION CONSTRUCTION RENTAL RATE
—
CAP RATES
*As compared to the previous bi-annual period.
UPDATE Atlanta Retail Rental Rates Overall Market (per sq. ft. NNN)
For the fourth consecutive quarter, the Atlanta retail market experienced positive absorption. This trend is a continuation of improving conditions from 2011 when the market saw an increase of 443,404 SF in retail occupancy. Year-to-date 2012, retailers have absorbed a net total of over 1 million square feet; the last time Atlanta retail absorption topped this amount was back in 2008. Areas seeing the most improvement in occupancy levels this year are Buckhead, Central Perimeter, Gwinnett County and Cobb County. Shopping centers and power centers are garnering the most demand, while malls continue to struggle. Leasing activity remains strong and is being driven by a number of retailers including fast food and small restaurant retailers, discount retailers, thrift stores and fitness clubs. Despite the positive activity, Atlanta’s overall retail vacancy rate remains flat; virtually unchanged over the past two years. The reasons for this are due to a combination of factors. For the most part Atlanta retail development activity remains dormant; however, new niche developments driven by pre-lease commitments are emerging in close-in, strong trade areas. For those retail properties which have delivered this year, they have done so with a considerable amount of vacancy; roughly 35% of the total space added. In addition, store closings from Best Buy, Blockbuster and K-Mart have also factored into added vacancy. The occupancy gains in 2012 are significantly off from a few years ago when over 6 million square feet of retail space was being absorbed annually. The amount of absorption occurring is hardly making a dent in the amount of retail space currently available which totals 35.7 million square feet. When looking deeper into Atlanta’s retail market, it is clear where most of the retail demand is taking place. Properties located in the urban core (Downtown, Midtown and Buckhead) are faring much better than those in the suburbs. The urban core’s overall retail vacancy rate is currently at 5%; in comparison, the suburban retail market is more than double this rate at 10.6%. The major driver to demand for intown retail is the Gen Y population. This generation desires live/work/play communities which provide numerous amenities including restaurants and retail. Retailers have taken note of this and have begun to expand into high-density urban markets where population growth and job creation are the strongest. In Atlanta, this expansion is most prevalent in the urban core where retail space has more than doubled over the past five years.
$16.00 $16.00 $15.50 $15.50 $15.00 $15.00 $14.50 $14.50 $14.00 $14.00 $13.50 $13.50
2012 2012
2011 2011
2010 2010
2009 2009
2007 2007
2008 2008
2005 2005
2006 2006
2004 2004
$13.00 $13.00 $12.50 $12.50
AVG Rental Rate NNN SOURCE: COSTAR PROPERTY
www.colliers.com/atlanta
As for the suburbs, while activity has been picking up over the past couple of years, struggles remain. Distant and emerging submarkets suffer the greatest challenges to leasing as much of the new development activity was originally prompted by residential growth projections which failed to materialize. Until the overhang in available housing and a resumption of residential development in these markets occurs, large amounts of vacancy will continue to plague these areas. Furthermore, Atlanta retail property delinquency rates are among the worst in the country. Two suburban malls in particular have helped the metro area reach this spotlight. Gwinnett Place Mall and Southlake Mall have seen their respective vacancy rates skyrocket over the past few years due to the loss of major tenants and the bad economy. As a result, their values have plummeted and owners of these properties have been unable to get refinancing to lower their debt service. This has led to Gwinnett Place Mall being foreclosed on and Southlake Mall heading down the same path. These are two notorious examples among dozens of shopping centers that are facing foreclosure or are in special servicing.
MARKET REPORT | Q3 2012 | RETAIL | ATLANTA
Total SF
NEW SUPPLY, ABSORPTION AND VACANCY RATES 12%
14
Square Feet (millions)
12
357,598,051
Vacancy Rate
522 offices in 62 countries on 6 continents
10%
10%
10
2012 Absorption YTD
8
1,035,666
8%
6 4
6%
2012 Deliveries YTD
United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118
641,590
2 0 2006
(2)
2007
2008
2009
2010
2011
(4)
Absorption
Deliveries
4%
Under Construction
1,074,443
2%
Avg. Rental Rate NNN
$12.86/sf
2012
Vacancy
•
$1.8 billion in annual revenue
• Over 2.5 billion square feet under
NOTE: 2012 DATA IS YEAR TO DATE
SOURCE: COSTAR PROPERTY
management • Over 12,000 professionals
ATLANTA-MSA | Annual Housing Permits
ATLANTA RETAIL | Investment Cap Rates UNITED STATES:
60,000
8.5%
50,000
8.0%
40,000
Jon Barry President, Principal | Atlanta 5871 Glenridge Drive, NE Suite 400 Atlanta, Georgia, 30328 TEL +1 404 574 1018 FAX +1 404 574 1118
7.5%
30,000 7.0%
20,000 6.5%
10,000
6.0%
0 2007
2008
2009
Single-Unit
2010
Multi-Unit
2011
2012 YTD
2007
2008
2009
Atlanta Qrtly AVG
SOURCE: U.S. CENSUS BUREAU
2010
2011
2012 YTD
US Qrtly AVG
SOURCE: REAL CAPITAL ANALYTICS
UPDATE Recent Transactions in the Market RESEARCHER:
SALES ACTIVITY PROPERTY
SALES DATE
SALE PRICE
SIZE SF
PRICE/SF
BUYER
Barrow Crossing
10/17/2012
$35,900,000
276,000
$130.07
Cole RE/Faison Ent.
Marrietta Trade Center
8/7/2012
$32,850,000
316,000
$103.96
Rothenberg Rosenfield
Roswell Crossing
7/18/2012
$30,800,000
201,979
$152.49
Weingarten Realty Inv.
Village Walk
9/28/2012
$20,400,000
81,159
$251.36
Prudential Real Estate
North Decatur Square
4/2/2012
$18,100,000
181,394
$99.78
Branch Properties
Shannon Crossing
6/14/2012
$13,200,000
101,098
$130.57
Schottenstein Realty
Atlanta Scott Amoson Vice President | Director of Research Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 877 9286 FAX +1 404 870 2845 This market report is a research document of Colliers International. Information herein has been deemed reliable and no representation is made as to the accuracy thereof. Colliers International-Atlanta, Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 520 offices throughout 62 countries worldwide.
Accelerating success.
www.colliers.com/atlanta