The US economic outlook is improving as the number of coronavirus cases continues to decline and with the recently passed $1.9 trillion stimulus bill dubbed the American Rescue Plan. As vaccinations continue to be distributed around the country, economic growth is now projected to reach 7%, which would be the fastest rate in nearly forty years.
Locally the Atlanta commercial real estate market continues to rebound with the Industrial, Office, and Multi-Family sectors all performing well compared to other major US metros. The Retail sector, while showing signs of slight improvement, continues to face many challenges in the months ahead. Let’s take a closer look at the 4 major sectors of the Atlanta commercial real estate market.
Industrial
Atlanta’s industrial sector has buoyed the local economy for the entirety of the pandemic. Boosted by increased demand for e-commerce goods, warehouse space and distribution centers have seen high during the last year.
Vacancy rates continue to hold steady for mid-size properties and have dropped significantly for both small properties (under 25,000 square feet) and larger spaces (over 200,000 square feet). Industrial developers are all in on the push to add new square footage to the market with over 8 million square feet already breaking ground in 2021 with nearly all of the projects being speculative in nature.
Retail
Atlanta retail finished 2020 with a negative net absorption rate for the first time in over a decade. Retailers remain extremely cautious when it comes to committing to long-term lease agreements and renewals. Vacancies are expected to continue to rise in the coming months as more nationwide chains close locations.
As leasing activity continues to slow to a crawl the specter of foreclosures and distress sales looms in the not too distant future. The deeds of both Town Center at Cobb and North Point Mall were both transferred to their lenders in early 2021.
Office
The Atlanta Office market has proven resilient during the pandemic. While growth has understandably slowed, lease terms have not been significantly shorter than pre-pandemic levels. The average lease term is holding strong at 3.3 years.
While the office market is holding steady the rest of 2021 will be key in projecting the long term affects the pandemic will have on the office market as a whole. There has been a massive shift towards working from home, suburban office locales, and flexible lease agreements but it remains to be seen if these trends will be permanent in nature.
Multi-Family
Atlanta’s Multi-Family market continues to perform well in 2021 a trend that has persisted since the middle of 2020. Rents are rising aided by the improving economic outlook and a slow supply pipeline. While most of the positive performance has been in the southern suburbs, even urban Atlanta and the northern suburbs are showing signs of steady recovery.
The long-term outlook for the multi-family market in Atlanta will be tethered to the demand for office space, so while all of the immediate signs are in the positive direction there is still much uncertainty in the long-term. As with the office market, the rest of 2021 should help to answer many questions concerning the long-term projection of the Atlanta multi-family market.