SPRING 2012 | RETAIL
ATLANTA
MARKET REPORT
Atlanta Retail Market Remains Stagnant; Vacancy Rate Unchanged
Updated May 2012
MARKET INDICATORS SPRING 2012*
FALL ‘12 Proj.*
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VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE
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CAP RATES
*As compared to the previous bi-annual period.
UPDATE Atlanta Retail Rental Rates Overall Market (per sq. ft. NNN) $16.50 $16.50 $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
$12.50 $12.50
2011 2011
2010 2010
2009 2009
2007 2007
2008 2008
2005 2005
2006 2006
2003 2003
2004 2004
$13.00 $13.00
AVG Rental Rate NNN SOURCE: COSTAR PROPERTY
www.colliers.com/atlanta
The Atlanta retail market finished 2011 with positive absorption, but only by a modest amount given historical occupancy gains in past years. For the year as a whole, retailers filled almost 320,000 square feet of retail space; a far cry from the millions of square feet absorbed annually prior to the economic downturn. As of early 2012, it appears the positive activity has carried over, although at the same modest pace. On the whole, retail absorption topped 240,000 square feet in the first quarter of 2012 with shopping centers seeing the bulk of the occupancy gains. The largest move-ins during the quarter are indicative of the type of tenants currently active in the market. These include Woodstock Market, a consignment furniture showroom, moving into 59,000 SF at Cherokee Corners Shopping Center; Hobby Lobby occupying 57,000 SF at Lawrenceville Market Shopping Center; and Old Town Bargain Thrift Store taking 45,000 SF at Fieldstone Plaza in Conyers, Georgia. There were significant move-outs as well in the quarter including Food Lion which announced in January it was closing and vacating twenty-nine of its grocery stores in Georgia including ten in metro Atlanta. Since the end of 2009, the overall retail vacancy rate in the Atlanta region has essentially remained unchanged. The occupancy gains experienced during this period of time have been matched almost equally by the amount of vacant space added to the market. This stagnant environment can be attributed to the persistent sluggishness in the local economy due to weak housing and job growth numbers. Housing starts which peaked at 60,000 per year in metro Atlanta in 2005 have been averaging 6,000 per year since 2009. Nevertheless, there are reasons for optimism as market conditions are showing improvement. High retail vacancy in many of the outlying trade areas is masking the strength of closer-in markets where occupancy rates are solid and rents are running at or near pre-recession highs. These areas include: Sandy Springs, East Cobb, West Cobb and Buckhead. In addition, retail tenant activity in the metro area is plentiful. Retailers actively opening new locations in metro Atlanta include Academy Sports, LA Fitness, Mattress Firm, Family Dollar and Von Maur which recently added its second Atlanta location in the former Bloomingdale’s at Perimeter Mall. Additionally, vacancies recently put on the market by bankrupt retailers such as Borders are being backfilled at a better-than-expected pace, especially in high retail traffic areas. Specific examples of former Borders’ locations already backfilled include Midtown Place (leased by TJ Maxx), Johns Creek Town Center (leased by Stein Mart) and Buckhead Triangle (leased by The Container Store). While housing starts are only just beginning to show an uptick, anecdotal evidence indicates supply for new housing in desirable locations is running low. Also, after three consecutive years of losses, job growth in metro Atlanta has finally returned as indicated by the Bureau of Labor Statistics data revision January 2012 which shows the region added 28,900 jobs in 2011.