What to Expect from Atlanta Real Estate in 2016

Throughout 2015, metro Atlanta experienced vibrancy and resilience in most sectors within the commercial and residential real estate markets. Office vacancy rates across the city have reached their lowest levels since 2008, while home prices rose 11 percent from December 2008 to November 2015 (S+P/Case-Shiller U.S. National Home Price Index) . The Atlanta real estate market is expected to thrive in 2016 through new developments, job growth and a growing housing market.

Office to the Max

Job growth is a big contributor to the surge in commercial leasing.  According to Integra Realty Resources’ 2016 Atlanta Office Market Report, Atlanta saw an increase of 700,000 jobs over 2014. More jobs mean more office space absorbed, and with the growth of Georgia’s technology and movie industries, Midtown Atlanta office space is getting increasing attention.

Vacancy rates for Class A CBD space are at 17.3%. While positive for real estate owners, developers and property management companies, the associated rental increases and decrease in concessions may be painful to those looking for space now.

In an article that appeared in an October 15 curbed.com article,  Cushman & Wakefield cited another factor in the article driving high prices: “…significantly depleted land inventory” in Buckhead and Central Perimeter, which has spurred jumps of as much as 20% in rent year-over-year at top properties.

Tech, film, millennials and more

The technology and movie industries mentioned above, coupled with advertising, media and information businesses have created a sustained demand for space that satisfies multiple uses – often office, retail and multifamily in one. With Atlantic Station having lead the way, new developments like Ponce City Market, West Midtown, parts of Buckhead and potentially even downtown in the coming years are attracting tech companies, young employees and a wave of supporting retail and multifamily activity. Some related activities to note:

• Jerome Russell of HJ Russell was a panelist at the Smith and Howard-moderated real estate panel in late 2015. Russell told the crowd that the 40,000 SF headquarters of the company in Castleberry Hill would be converted to the Russell Innovation Center. According to Russell, the Russell Innovation Center will be populated with co-working and lab-to-market space targeting minority-led startups in Atlanta.
• 725 Ponce: Atlantans are happy to see the depressingly monikered “Murder Kroger” replaced with a 12-story office building and a redeveloped Kroger along the Atlanta Beltline next to Ponce City Market.
• Ponce City Market was an immediate success with its reuse of the historic Sears building into a mix of offices, apartments, shops and restaurants along the Beltline. Originally slated to include 350,000 square feet of office space that total is now 500,000 square feet that is 90 percent leased (Atlanta Business Chronicle).
• Memorial Drive is beginning to attract the attention of top Atlanta developers, and it’s about time. Showing its age, this corridor will benefit from an evolution to a safer, more walkable, mixed-use district.

Multi-Family Activity

Commercial office rates aren’t the only ones on the rise. According to the Integra Realty Resources’ 2016 Viewpoint on the Atlanta Multifamily Market, “Urban Class A market rent has continued to increase with a current average market rent of $1,493 versus $1,360 last year.” The report further states, “Tenant demand for in-town living with restaurants and entertainment options, within short walking distances or a MARTA ride, continue to fuel the new construction of multifamily development with high amenities.” At the same time, unit sizes are shrinking and suburban multifamily markets are benefiting from families looking for lower rent.

Summary

The Urban Land Institute has listed Atlanta as one of the top six real estate markets to watch in 2016. As corporate Midtown Atlanta residents for many years now, we are encouraged and heartened by Atlanta’s real estate resurgence. We encourage you to read some of these additional resources mentioned in this article that go into further detail on the Atlanta market:

• 2016 Atlanta, GA Multifamily Market Report
• 2016 Atlanta, GA Office Market Report

Looking for more insights from one of the top Atlanta real estate accounting firms? Contact Mark Abrams at 404-874-6244 and or simply fill out our form below and we’d be glad to help.