Demand and supply remain in balance, with low vacancy and record high rates
EXECUTIVE SUMMARY
Mid-Year In Review
Atlanta’s retail market shows a positive outlook despite some recent slowdowns. Leasing activity is down but remains healthy, with net absorption staying positive but below the norm due to limited new construction. Vacancy rates are incredibly low, hovering around 3.8%, while rental rates have reached record highs at $19.64 per sq. ft. The construction pipeline has shrunk significantly compared to last year, indicating a potential shift in the market’s pace.
Atlanta Economic Update
The latest unemployment rate for the Atlanta metro area is 3.9% as of July 2024. This is slightly higher than the previous month but lower than the national average and the long-term average for the area. Atlanta’s job market has more than recovered from job losses during the pandemic. There are now 6% more total jobs in the Atlanta area than there were in February 2020. Strong job growth has come from Retail-using sectors such as finance, professional services, and the technology sector.
Longer term, Atlanta boasts lower living and business costs than most large East and West Coast metros, and this competitive advantage should continue to boost population and job growth for the foreseeable future.
MARKET OVERVIEW
Leasing Remains Healthy but is Down Over Recent Quarters
With the new deliveries and the construction pipeline both decreasing over recent quarters, leasing activity has also slowed. Through the first half of 2024, leasing activity has totaled 2.3 million sq. ft. With a sub-4% vacancy rate, most new leasing activity is limited to new construction deliveries.
Net absorption Continues to Remain Positive
Net absorption has been healthy, recording 229,415 sq. ft. through the first half of 2024. Retail demand has been positive since mid-2020, which was the height of the Covid-pandemic. Since then, supply and demand have largely been in balance. Limited new construction has put a lid on higher absorption levels as there is simply not much higher quality retail space to lease. Notable new leases for 2024 include a new 76,139 sq. ft. Walmart Neighborhood market at Historic West Village, a 60,000-sq.-ft. Yes Foods at Forest Square, and The Anchor School leasing 50,000 sq. ft. at Wesley Chapel Crossing.
Vacancy Rate Extremely Low at 3.8%
The overall vacancy rate in Atlanta’s Retail market is at 3.8%. This is up 10 basis points over the past quarter, but flat with Q2 2023. Like most major Retail markets across the country, vacancy is near a record low. Atlanta has maintained a sub-4% vacancy rate over seven consecutive quarters.
Under Construction Pipeline Tapers Off
New deliveries for the first half of 2024 have totaled 815,605 sq. ft. The under-construction pipeline of 725,309 sq. ft. continues to steadily decline and is 61% below the 1.9 million sq. ft. that was underway in Q2 of 2023. On a submarket level, the Airport/South Atlanta and North Fulton accounted for almost half of the retail projects currently underway (47%).
Investment Sales Trends
Over the past year, 704 Retail properties were sold in the Atlanta Retail market with an average transaction price of $193 and an average cap rate of 6.9%. There has been a notable uptick in transaction volume of portfolio sales for Neighbor/Community Centers and Power Centers across the Atlanta market. Houston-based 5Rivers CRE and Big V Property out of Charlotte have been some of the more active investors so far this year.
Rental Rates Up Slightly, Reaching All-time Highs
The average monthly rental rate (NNN) for Atlanta’s Retail market is $19.64 per sq. ft. This is up slightly from last quarter (0.8%) but up 0.6% over the past year. Over recent years, rates have been trending higher and stand at all-time highs for the market overall.
Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]
