Four Reasons Why Atlanta Will Weather The Next Storm Better

Dan Wagner says commercial real estate fundamentals remain strong in markets across the United States, including Atlanta.

ATLANTA—Growth. That’s the keyword to describe Atlanta’s commercial real estate market. How much more the market will grow in this cycle is up for debate. “Lately the most used phrase in the commercial real estate industry is, “What inning are we in?’,” Dan Wagner , southeast research manager for CBRE , tells GlobeSt.com. “The very fact that the question is being raised indicates market participants believe we may be nearing the end of a growth cycle.” However, Wagner continues, commercial real estate fundamentals remain strong in markets across the United States, including Atlanta, as referenced in March’s Marketflash. Office and industrial vacancy rates currently sit at 15-year lows. But Wagner says the run-up in occupancy and rents over the last three years is bound to slow. He offers four reasons why Atlanta is better positioned now—relative to 2006/2007—to weather interruptions in the economy. 1. Industry and Employment Diversification: Wagner says, “Atlanta possesses an increasingly diverse industry and employment base, better prepared to stave off the effects of a downturn within one particular industry sector such as housing, energy or finance.” 2. Development Activity: “In general, the pace of new commercial construction is in line with, or falls short of, current demand,” Wagner says. “Additionally, exposure in housing and related industries is restrained relative to ten years ago—single-family home permits total roughly one-third of their prior peak before the last downturn.” 3. Space Densification: “Companies are increasing office densities, signaling less space could be placed back on the market during a downturn,” Wagner says. “This prospect, when combined with paced new development activity, could help dampen the blow to occupancy levels during a down cycle.” 4. Business Costs: “Uncertainty in the economy typically triggers cost cutting, making Atlanta a very attractive metro to locate operations,” Wagner says. “In fact, KPMG’s Competitive Alternatives guide recently ranked Atlanta the number one most cost efficient large US market.” As Wagner sees it, conservative development activity, strong in-migration by both corporations and individuals, successful job creation and the return of healthy residential markets have resulted in moderate but consistent economic growth. This moderate activity, he concludes, has resulted in a lack of overexposure, which may act to deflect some of the shockwaves of a downturn. Will Atlanta’s office values keep rising? Check out my recent column for some insight.