Fall 2012 | Atlanta Retail Market Report

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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


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