This Week on The Street August 20, 2012
(A more or less regular compilation of news, factoids and observations.)
By Harold V. Shumacher
If you want a quick overview of real estate activity in metro Atlanta it’s hard to beat Databank’s semi-annual Symposiums. The latest was held last week and included reviews of the multi-family, industrial, retail and investment markets along with interviews of former Atlanta Mayor Andrew Young, Congressmen Lynn Westmoreland and an economic forecast by Georgia State’s Dr. Rajeev Dhaway.
Some takeaways. Other than the apartment arena, Atlanta is no longer considered a “core market” for investors. The over supply of office and industrial space has diminished investors’ appetites in the metro area according to panel participants. The demand for quality products remains at an all time high (the bifurcated market theory) and leased up office, retail, and industrial properties will continue to garner pre 2007 prices and cap rates. Those properties that are less attractive will continue to sit adding to what is likely to remain a large pool of unsold assets as banks continue to add troubled properties to the marketplace. Through the next 3 years (2012-15) pools of loans will continue to come due; many requiring a large capital injection to be financeable.
While apartments have been the most active sector, there are some alarming trends. The majority of new apartments under construction are geared to the upper end of the market, anticipating rents of anywhere from $1,000-$1800 for a typical two bedroom. The average rental rate in the metro area is slightly under $800 currently. Furthermore the increase in population we’re seeing is not the result of people re-locating for work it’s more organic (a demographer’s term for people having children). Atlanta’s population is growing (slower than in years past) but its young children not technology workers. While the city’s campaign to attract the best and brightest is a valid strategy, the numbers don’t reflect that occurring.
On the retail front the lack of new product (construction) is forcing growing retailers to either ratchet back on the number of new store openings, take alternative locations, or downsize (or occasionally increase) their store size to match what is currently available. We don’t anticipate that to change for the next 18-24 months as there are only a handful of new projects in the pipeline. Experiential shopping will become increasingly important-the customer demanding something different from a retailer. It’s easy to order a book, c.d., or shoes on line, but you can’t duplicate an experience (other than porn on the internet, at least not yet.) The internet as a marketing tool will continue to be important, but as part of a combination “clicks and bricks” strategy. Web sites will drive people to stores rather than replace the shopping experience.
Former Mayor Young also offered some interesting observations. When questioned about the recent failure of the TSPLOST referendum in metro Atlanta, he noted that the name was confusing, the outcome and value for the average voter wasn’t clear, and there was a buzz saw of anti-government sentiment that was not anticipated. Young went on to note that there were some positive outcomes-a closer working relationship between the state and metro Atlanta area (as exemplified by Atlanta Mayor Kasim Reed and Governor Nathan Deal campaigning together) and stronger communication among metro leaders. The latter should be increasingly important in the future. Atlanta can’t continue to grow if we don’t have inter-regional cooperation, a task made far more difficult in a sprawling metro area with lots of voices at the table clamoring for attention. “In the old days,” Young pointed out, “there was a handful of business and community leaders who knew each other from school, college, churches and social mingling and could work face to face.” That’s far more difficult in a region of close to six million people spread out fifty miles from the center city. “Keep in mind” he added, “all politics is local but all economics is global.”
Andre Koleszar, Regency Center’s vice president of leasing for the Southeast, offered some very succinct principles to keep in mind across all the disciplines. Access capital when you don’t need it, deals don’t equal success, build to the market not the site, think the worst case, don’t let ego dictate actions, and finally, gravity is real. A good message for all of us.
It’s an Olympic feat given the numbers involved. Over the course of the recently concluded 17-day games, Olympic organizers estimate 14 million meals were served to athletes and spectators alike. On a busy day in the athletes’ dining room, chefs served 65,000 meals- that breaks down to: 25,000 loaves of bread, 31 tons of poultry items, 232 tons of potatoes, 19 tons of eggs and 75,000 liters (20,000 gallons) of milk.
Shumacher Group Client Recognized as one of Year’s Hottest Concepts.
We’re proud to announce that Del Frisco’s Grille, opening in the former Craft space at 3376 Peachtree Road (in front of the Mandarin Oriental Hotel) has been named one of Nation’s Restaurant News’ Hot Concepts of the year. Del Frisco’s Grille, based in Southlake, Texas, is the sister brand to Del Frisco’s Double Eagle Steakhouse. The concept emphasizes a more casual, bar-centric atmosphere. Other newcomers to keep an eye on are Hudson Grill, taking the former Golden Buddha space adjacent to CNN Center, YEBO from the owners of 10 Degrees South at Phipps Plaza (in the former Grape space, ) Big Kahuna, adjacent to Pacific Rim in downtown Atlanta; a second Victory Sandwich Shop and Mar Coastal Mexican, in the former Feast location, both in Decatur and Noche’s first true suburban location on Old Alabama in Alpharetta .
Recent transactions for The Shumacher Group include:
Sale of former Fava Mezze and Rafeedie’s to Giovianni De Palma (owner of Antico Pizza)
Sales of GATAS Sports Bar Hinesville, Ga.
Re-branding of BW Tavern in Alpharetta for an unnamed Seafood Grill
Sale of 4095 Lawrenceville Highway Lilburn, Ga. (land and building) to Garrard Development for re-development as Family Dollar