This Week on The Street: September 10, 2013

by Harold Shumacher

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This Week on The Street 

Atlanta Restaurant Real Estate

This Week on The Street  (A more or less regular compilation of news, factoids and observations.)

September 10, 2013

by Harold V. Shumacher

Tis the season….for continuing education. Over the past few weeks we’ve had the opportunity to hear a wide variety of speakers  at both Data Bank’s semi-annual real estate symposium and an event co-sponsored by ICSC and the Atlanta Board of Commercial Realtors.

In a nutshell Atlanta is on the way back.  The impact of the “great recession” proved longer and deeper than many expected and Atlanta has been slow in it’s recovery but recent reports of new business locations, expansions and employee hiring are all trending positive.

On the retail front, at least based on occupancy, we’re back to where we were in 2008 (keeping in mind there has been very little new construction during that almost five year period.) In fact the rate of new retail construction has slowed from 10 million square feet in 2005 to 500,000 in 2012.

While we still trail other markets-like Dallas and Washington D.C.  -, where there’s been positive absorption and growth the signs are encouraging. Among the drivers  have been the value sector-dollar stores, automotive parts and service, fast casual and inexpensive ethnic restaurants, community financial services (i.e. pawn shops, gold stores and title lenders.

Investment sales are also showing improvement .   According to Co-Star, the sale of ten million dollar plus properties has doubled since 2012 (but is half that of 2007.)  The buyers are becoming more institutional (“after tax”  to use a euphemism) rather than the amateurs and exchange buyers that comprised the main audience a few years back.

Despite the positive signs, to many investors Atlanta-at least for retail-has been relegated to secondary market status with typical prices 100 basis points (1%) lower than  what prices  are in other markets for comparable markets (i.e. a free standing Starbuck’s will cost more to buy in Dallas than Atlanta.)

Retail development is all over the board.  While Kroger continues to build bigger stores, 100,000 square feet becoming the new “normal” others are opting for smaller, more efficient footprints.  Aaron Rents, for example, has shrunk their retail  stores almost in half while doubling the size of their warehouses.

U.S. Senate candidate Jack Kingston, currently a congressmen from the Savannah area, made some interesting points.  With the proposed deepening of the Savannah harbor,  the expansion of the  Panama Canal (in 2015) and advent of super cargo ships, the Georgia coast should anticipate some positive growth. In fact, according to Kingston, there is a five and one half return predicted for every dollar invested.

On the industrial side, manufacturing is coming back to America as China’s rising costs, long distance shipping fees, a desire to buy American  and improved efficiencies make local production more enticing.  Of the 52 major industrial markets in the country 50 reported positive absorption over the past 12 months.  There is also an increase  in the number of spec buildings, especially as the housing sector recovers.

Of interest, at least to us, was that one third of the industrial growth in 2012 is attributable to Amazon as they continue to improve their distribution channels. Brick and mortar retailers are also realizing that internet shopping is not an either/or proposition but part of an integrated approach to merchandising. Home Depot, for example, is now utilizing their existing stores as pick up points for merchandise ordered on-line. The growth for the company has been distribution centers, not new stores, according to  Jim McCarthy, the company’s real estate director.

If you work in an office expect less space in the future. The average size of an office-or more accurately the amount of square footage allocated per employee-has shrunk almost by half. As companies begin to evaluate occupancy costs on a per employee basis expect this trend to continue.  There’s also a slow trend back toward individual offices (albeit smaller) rather than bullpens and large common areas. Apparently we still like some privacy.  Don’t expect any new buildings any time soon.  The average lead time for a suburban project is one to two years and three to four years in a Midtown, Buckhead or the Perimeter area.

If there’s frothiness it’s likely in the multi-family segment.  Apartment developers are beginning to accept lower  returns, buyers are lining up to buy the projects that are coming onto the market-driving up prices-, and the new product being built is at the higher end of the price spectrum seemingly-at least to us-signs of overbuilding.

Economic guru, and Georgia State professor Dr. Rajeev Dhawan also weighed in with some interesting observations.  First it takes a lot to move the needle of public awareness noting that Cisco recently  announced significant layoffs and the stock market hardly reacted.  Wal-Mart’s annual sales increase have rebounded, from a low of 1% a year to 2.3% in the latest fiscal year and, again, little movement in the stock price. According to Dhawan , we have come to expect slow and steady as the norm.

Auto sales, while seemingly strong on paper, are more a function of lower interest rates and longer term financing, as long as 97 months in some cases.

It seems to us that an inevitable consequence of a city getting larger is the need to seek out the unique and different and claim it as your own. Whether a hideaway club, a down a back alley bistro or a one of a kind seller of unique food stuffs we want to be in the know.

For the foodie set pop up kitchens and special dining evenings seem the latest attractions. In the past few weeks we’ve enjoyed out of the ordinary Japanese Fare at Gato Bistro (only on Monday and Tuesday) nights, the succulent fried chicken at the Candler Market’s back counter.  We also enjoyed the once a month four course fried chicken served up at Roswell Road’s Buttermilk Kitchen. For those who can’t wait that long for their fix Watershed continues their  Wednesday  evening chicken specials.

This seems to all  bode well for  the local restaurant scene. Among newcomers to keep an eye on in the coming months are: Stem Wine Bar, East Cobb;  Lips, Buford Highway; Smash, Brookhaven, a second Roxx Tavern, Northlake area,  Marlow’s, at the Prado Sandy Springs; Pig and Pearl,  Atlantic Station and Mad Bull Tavern  Perimeter.

Recent transactions for the Shumacher Group include…

 

.  Chef Advantage (leasehold and business)

  • Sale of Planet Smoothie – Peachtree Center, Downtown Atlanta
  • Lease for Tin Lizzy’s at Mall of Georgia, Buford
  • Sale of Former Hardees – 6198 Memorial Dr., Stone Mountain
    • Sale of Cioffi’s Pizzeria/Rhodes Bakery, Stone MountainSale of    .  Sale of BG Grind House East Cobb

·  Sale of Buckhead Pizza Company – Cumm

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