2020 was a year of uncertainty and struggle. Back in January few could predict the multiple crises that would make 2020 a year like no other. In early January the CDC issued travel warnings about a strange new virus outbreak in Wuhan, China. By January 21st the first reported US coronavirus case was confirmed in Washington state. Within a week China enforced a full lockdown in Wuhan and President Trump suspended entry into the US from foreign national travelers coming from China.
During February the world watched as the virus quickly spread and businesses began to brace for the coming economic impact as rising numbers in Asia began to foretell what looked to be a deadly global pandemic on the horizon. By the middle of the month the outbreak was presenting major logistical challenges as ports and supply chains reported delays and stalling production. On February 24th the Dow Jones Industrial Average had its worst day in two years and by the end of the month the US would have its first confirmed death due to effects of COVID-19.
March brought major lockdown announcements in Europe including Italy which was hit particularly hard in the early months of the outbreak. By March 11th the World Health Organization declared that the virus outbreak was now at the level of a global pandemic. In the US grocery stores shelves went empty for items such as toilet paper and hand sanitizer and people began to become familiar with social distancing and preventative measures such as wearing masks in public places and working from home. Many restaurant and retail locations began to close as the case numbers and deaths continued to rise. On March 13th, President Trump declared a national emergency releasing $50 million in aid to buoy a quickly failing economy. Another $2.2 trillion of stimulus money was agreed to on March 27th.
By April unemployment had shot up from 3.8% in February to 14.4%. New York City became the major US hotspot for the virus. By late May it appeared that many of the measures taken to slow the spread were having a positive effect, but then, at the end of month, George Floyd was killed by police in Minneapolis. The gruesome video of the incident went viral and triggered weeks of massive protests nationwide.
As the summer moved along, coronavirus cases again began to rise. By September 25th the US surpassed 7 million cases. During the final days of the presidential campaign, President Trump himself tested positive for the virus. Trump would end up losing the race for the presidency in a close election to Democrat challenger and former Vice President Joe Biden.
In December the first COVID-19 vaccines were approved and started the rollout process, racing against the continued rise in case numbers to once again return our lives to something akin to normal.
During these trying times Atlanta has fared better economically than many other US metros, adding back roughly three-quarters of the jobs lost since the start of the pandemic. Atlanta benefited from an economy not dependent on tourism as its industrial base and strategic distribution location buoyed the local economy. Looking forward it is obvious that the commercial real estate market in Atlanta will continue to be affected by the pandemic for the foreseeable future. It is also obvious that the speed of the recovery will vary greatly from sector to sector.
Atlants’ industrial market flexed its muscle when it was needed most during the economic turbulence experienced during the pandemic. After an initial knee-jerk reaction slow down for industrial leasing at the onset of the pandemic the Atlanta industrial market picked up steam with leasing volume surging over the last few months. Low vacancy rates and high demand have protected landlords from the falling rents seen in other commercial sectors. Atlanta will continue to benefit from its strategic location and continue to rise as the distribution hub of the south.
Atlanta continues to be an attractive location for big name office tenants landing commitments from the likes of Amazon, Microsoft, Papa Johns and Google over the last year, but slowing rent growth and a rise in subletting has become a burden on the sector’s overall recovery. Atlanta has not been unscathed from the effects of the pandemic but it has clearly outperformed peer US metros and should continue to do so in the future.
The major threat to the Atlanta office market recovery is an expected increase in supply combined with a trend towards more permanent work from home solutions as many companies have come to the realization that working from home may be a net plus cost wise even after the pandemic has waned. The long term outlook for the Atlanta office remains positive as other metros simply cannot compete with Atlanta’s highly educated workforce and overall affordability.
Atlanta’s multifamily market closed out the year in strong fashion showing a surprising resilience to the economic downturn caused by the pandemic. Strong demand has allowed for above average rent growth especially in Atlanta’s more affordable suburban markets. Encouraged by these positive signs in the market, investors have returned in full force setting record sales volume numbers in the final quarter of the year.
Retail, of course, has been the commercial real estate market most affected by the pandemic. Lease terms have shortened and with continued uncertainty surrounding the speed of the vaccine rollout there is still no end in sight for the struggling retail market in Atlanta or the nation as a whole.
Even with Georgia’s aggressive response to the pandemic, opening the economy fully in May, many restaurants and retailers face an extreme shortfall in expected revenues compared to anything close to a normal year of economic performance.
With the trend towards less consumer spending in brick-and-mortar locations and sit-down restaurants, retail tenants have been reluctant to commit to longer leases. How quickly the US returns to normal retail consumer behavior is largely dependent on the success of the vaccine rollout. Until then, expect the retail market to continue to suffer.
We Can Help
Whether you’re looking to lease, buy, or sell commercial property, now is still the time to do it in Atlanta. The Meridian Real Estate Group has been assisting commercial clients for well over a decade and would love the privilege of earning your business. Our goal is not just to help our clients with a transaction, but to support the building of financial legacies through real estate. Call us today at 678-631-1723 or visit us online at www.themeridianway.com. We look forward to serving you.