Market Data

Most Georgia Markets Look Peachy

What do Vidalia onions, Coca-Cola, and Martin Luther King Jr. have in common? They all name the state of Georgia as their birthplace.

Georgia`s other claims to fame include Atlanta's Hartsfield International Airport, the world`s busiest airport, and more miles of fiber-optic trunk lines than any other state. These infrastructure advantages, coupled with a highly educated workforce, make Georgia one of the leading locations for business start-up and relocation.

Retail Starts to Rebound Like most cities that rely on tourism, Atlanta`s retail market has suffered from the economic downturn, says Palmer Bayless, CCIM, of the Shopping Center Group. However, "A shift away from high-end soft-goods retailers has led to the expansion of value-oriented retailers such as Wal-Mart, Target, Ross, and Kohl`s," he says. Despite this expansion, big-box development has slowed, which has "negatively affected the development of new power centers," Bayless says.

Yet small-scale development has not slowed, due to Atlanta`s reputation as one of the country`s leading cities for population influx, which contributes to strong residential growth. "Supermarkets follow this growth, and the development of grocery-anchored neighborhood centers has continued," he explains.

Bayless believes that development will continue to follow the population densities. "The focus of retail demand in Atlanta will be inside of Interstate 285 and, most particularly, in midtown," he concludes.

Industrial Sees Future Growth Last year saw an increase in available industrial product in Atlanta, says Roderick S. Tumlin Jr., CCIM, SIOR, of Advantis GVA. The increase resulted from "several big boxes going dark and several speculative buildings being built," according to J. Leslie Johnson, CCIM, of King Industrial Realty in Suwanee.

Lease rates in Atlanta range from $3 per square foot to $4.50 psf net annually depending on the submarket and have decreased approximately 5 percent in recent years, Tumlin says. Sales prices, on the other hand, have remained stable, averaging between $25 psf and $35 psf.

The majority of the current industrial construction in Atlanta is spec projects that were begun before the economic downturn, "but the amount of square feet is significantly below the [approximately] 12 million sf in 2000-01 that was delivered speculatively," he says.

About 80 miles north of Atlanta sits Ellijay, a rural town known as the apple capital of Georgia, says Lynn Mitchell, CCIM, of Mitchell Realty Group. Although the textile industry in the area is experiencing large cutbacks, interest in small business -- such as cottage industries started by incoming retirees -- is booming, leading to nearly 100 percent industrial occupancy. Annual lease rates average $7 psf, with larger facilities leasing at $5 psf. "Rents are up, and we expect them to rise rapidly over the next few years," she says.

Little industrial space is available in Ellijay, so sales are "virtually nonexistent," Mitchell explains. New construction comprises mainly build-to-suit properties "and is, proportionate to the size of the community, booming."

Multifamily Slow but Stable Atlanta`s multifamily market "is fairly healthy, with new class A units still being built, although absorption is slightly less than new deliveries," says William T. Adams, CCIM, CRB, of W.T. Adams and Co. Overall occupancy rates are in the mid-90 percent range, according to Edward Martin, CCIM, of MLC Properties.

Multifamily lease rates range from 90 cents psf to $1.10 psf monthly, and growth is expected to be about 1.5 percent, Adams says. Sales of class A units fell from approximately 8,500 units in 2000 to 3,900 units in 2001, and the price psf dropped about 12 percent. However, sales of class B units increased about 30 percent over the same time, and prices remained unchanged. Martin believes that the city will experience a downward trend in multifamily sales as the condominium market becomes saturated.

Adams foresees new construction slowing this year, but picking up again in 2003. "Hot areas will be infill locations inside I-285, such as downtown, midtown, and Buckhead," he says. Martin concurs that interest in city living will continue to increase as commute times grow and young and empty-nest renters desire to live in urban areas.

The multifamily market in central eastern Georgia is stable with an overall occupancy of 91.5 percent, reports David C. Penix, CCIM, of David C. Penix and Associates in Augusta. Lease rates average $5.75 psf and are slightly up from last year; however, no sales activity or new construction is occurring in the area.

Office Sluggish for Now Although the Atlanta office market is active, it is "heavily oriented around subleases, which are in overabundance," says R. Dale Lewis, CCIM, of Carter and Associates. "Supply is definitely greater than demand."

Occupancy rates at the end of 2001 were 90 percent in the Atlanta central business district and 86 percent in the suburbs, according to Michael J. Pelt, CCIM, of M.D. Hodges Enterprises. Lease rates vary dramatically depending on the market and the class of the building, averaging from $15 psf to $30 psf gross, he says. Leasing activity in "larger office and building floor plates has slowed dramatically, while activity in the 1,500-sf to 3,500-sf range has remained active," reports T. Neal Pringle, CCIM, of Cobblestone Capital Cos.

Spec development has slowed, but build-to-suit activity remains stable, Lewis says. "We are expecting a decrease in new development and an increase in absorption over the next 12 to 18 months," Pringle reports. Pelt foresees office development in Atlanta resuming in 2003. "Buckhead and midtown will be two of the hottest submarkets for office sales," Lewis predicts.

Athens, home of the University of Georgia, is located about one hour northeast of Atlanta. The office market there is "very soft at this time," says James T. Boswell, CCIM, of Boswell Properties. Vacancy rates are up and "lots of space is available in all categories," he says.

Office lease rates in Athens are stable and range from $12 psf to $14 psf for class A space, from $9 psf to $11 psf for class B space, and from $6 psf to $8 psf for class C space, he reports. Little sales activity or new construction is occurring; however, Boswell believes that the office market will resume growth in the last quarter of this year.

Market Glance
Neutral Nebraska

In Nebraska, "The general economy is still quite strong; however, there are signs of an economic slowdown," reports Richard Secor Jr., CCIM, of the Lund Co. in Omaha. Despite this, downtown Omaha is undergoing a $1 billion revitalization that will add two major office buildings, a convention center, a performing arts center, and several apartment rehabilitation projects to the market, he says.

Office. Leasing activity in Omaha was slow last year, with "a lack of bread-and-butter deals," says Jim Maenner, CCIM, of CB Richard Ellis/Mega Corp. Rates are slightly down and range from $10 per square foot to $15 psf annually. The high vacancy rate of 15 percent is due to an overabundance of sublease space on the market. Few companies are purchasing or building property; most purchases are by investors, he says.

Retail. Lincoln has experienced a "significant increase in retail development over the past three to four years," says Tom Wanser, CCIM, of First Lincoln Equities. Although retail sales last year did not live up to expectations, a number of developments in the pipeline will help Lincoln resume positive growth, he predicts. In Omaha, "vacancy in small retail shop space has increased somewhat over the past two to three years, and probably is in the 7 percent range now. [There is] no significant vacancy in big-box or anchor tenant space," says Steve Farrell, CCIM, of Investors Realty. Retail land sales prices in large Nebraska markets range from $5.50 psf to $9.50 psf, and in small markets prices range from $2.50 psf to $3 psf, according to Sue Goding, CCIM, of Goding Realty in Seward.

Industrial. Leasing activity in the Omaha and Lincoln areas has slowed, with lease rates ranging from $4 psf to $5.25 psf for newer space, says R.J. Neary, CCIM, of Investors Realty in Omaha. Construction also has slowed, but Neary predicts that "the industrial real estate segment will continue to grow along Interstate 80, creating land sales and new construction.

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