According to the latest report from the Bureau of Labor Statistics, Atlanta has added back a little more than half of the jobs lost during the initial shutdown due to the global pandemic, but the most recent jobs report shows a vast slowdown in those jobs gains during the last two months. The reports show that as Georgia became a coronavirus hot spot in July job gains slowed with the accompanying reduction of economic activity. As virus numbers are now beginning to trend down experts are hopeful that the economic recovery in Georgia will again pick up the pace.
In another example of the pandemic’s negative economic impact, Coca-Cola announced plans to eliminate thousands of jobs in an effort to reorganize operations in reaction to less sales worldwide in the hospitality and restaurant industries.
“Given the ongoing uncertainty surrounding the coronavirus pandemic and levels of lockdown, the ultimate impact on full year 2020 results is unknown,” Coke said in its second-quarter earnings statement. “The company’s balance sheet remains strong, and the company is confident in its liquidity position as it continues to navigate through the crisis.”
The impact of the pandemic on the economic statistics has generated observable trends in the commercial real estate market in Atlanta. Amongst the four major commercial property types retail has been the most affected by the pandemic. The office market has also seen a slow down in leasing activity, but Atlanta’s industrial and multifamily markets are both amongst the leaders of the economic recovery nationwide.
So far there has yet to be an overall negative effect to the industrial real estate in metro Atlanta from the pandemic. Leasing activity has not stalled due in large part to an industrial space leasing spree in the region from Amazon, signing four new leases in Georgia since the start of the pandemic. Amazon is not alone as other large companies have made significant commitments in the region including, Walmart, the Home Depot, and Purple.
While leasing activity remains strong there is a concern that the amount of space coming in the construction pipeline will add supply-side pressure causing vacancies to rise. However, for the immediate future it appears that the leasing volume will keep pace with increasing supply. Georgia benefits from its cheap land, multiple rail lines and interstates and the fastest growing port in the nation, the Port of Savannah.
There have been many theories as to the long term effects of the pandemic upon the office market. Obviously, more people are currently working from home than at any time in recent memory, and modern technology is responsible for making that possible. This trend will almost undoubtedly have an impact on the long-term performance of the office market.
In the Atlanta metro area monthly leasing activity is down about 30 to 40% when compared to recent historical averages. Both urban and suburban areas saw a steep drop in office leasing activity immediately after the onset of the pandemic and only a slight recovery of activity since. A massive office lease was signed by Microsoft in Midtown helped to buoy urban office leasing performance in Atlanta, but take out that deal which alone accounts for 100% of Atlanta leasing for a typical month, and there is an even bleaker picture.
It appears that the slowdown in office leasing will continue for the foreseeable future, as firms nearing the end of their current lease commitments are not likely to sign long-term extensions with so much uncertainty in the business climate.
Despite the summertime rise of Covid cases, Atlanta’s multifamily market continues to recover at a pace higher than the other tech heavy downtown locales. While leasing activity has picked up over the last few months there are still significant challenges moving forward. Supply is peaking while job growth in the area has slowed.
The recovery within the multifamily market has varied for different locations and price points. Rents fell significantly across the board in the weeks immediately following the initial economic shutdown. In premiere urban locations, like Buckhead and Downtown, rents have remained flat with the only exception being West Midtown where rents are improving. While the more blue-collar suburban markets like Henry County and Clayton County have led the recovery.
As for the long term outlook there remains great uncertainty and performance over the next few months will depend greatly upon government stimulus and the status of the overall public health crisis. Multifamily construction activity has slowed greatly due to this uncertainty.
Atlanta’s retail sector has been significantly affected by the pandemic, as many retail locations had to either temporarily shut down or limit their services in some way. Even with Georgia being one of the first states to reopen their economy, the retail market as a whole will not return to pre-pandemic levels for quite some time. Retail vacancies are expected to continue to rise over the next few months leading to weaker rent growth and slower transaction activity.
The retail market in Atlanta was strong heading into the pandemic, but while leasing activity has increased somewhat in recent months more retail businesses and restaurants are continuing to shutter permanently. There have been significant shifts in business models in reaction to the pandemic, but it remains to be determined how long it will take for the retail market to recover in metro Atlanta.
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.