While three governors wrangle over water amid the Southeast's worst drought in decades, commercial real estate firms are adopting measures more familiar to the nation's parched Southwest. Compounding the problem is a surge in demand: The 10-county Atlanta area has grown by more than 600,000 people since 2000 to more than 4 million residents.
The Metro Atlanta Chamber of Commerce calls the water crisis the biggest threat to the area's economy. It warns that even after the drought ends, without tough measures the region could run out of water in 12 to 15 years.
Property managers have installed individual meters in multifamily units to gauge water use and some confront tenants or condo owners with high consumption. Landlords constrained by local water restrictions have planted desert shrubs and let lawns wither. Some capture scarce rainwater in cisterns and advise condo owners to toss used ice cubes onto wilting plants.
“We've drained all of our fountains and all the pools, and everything is empty,” says Connie Engel, a partner in suburban Atlanta with Childress Klein Properties, which owns more than $1 billion in Southeast real estate assets.
“Droughts are cyclical,” says Engel. “But the bottom line is we have a water problem, and we need to fix it. And we need to fix it in a way where we don't end up with all these multiple states arguing with each other — that's just a ridiculous waste of energy.”
Atlanta-based Novare Group, which has built 3,500 condos and has 3,000 under construction, monitors residents' water use. “It's not that we're playing Big Brother,” says Rich Hagan, chief operating officer for Novare Management, but the firm helps residents lower their bills by notifying them of elevated water usage.
Hagan thinks the dwindling water supply could affect developers' ability to get building permits as the drought drags on. Meanwhile, water bills for Novare's managed properties rose an average 10% per year over the last two years.
If building permits are limited and water rationed — even at hotels — the potential impact on Atlanta could be an economic loss of $12.8 billion, says Rajeev Dhawan, director of economic forecasting at Georgia State University. There's no precedent, so it's hard to gauge the loss.
The drought covering nearly a third of the Southeast is exceptional, according to the National Drought Mitigation Center. Severe or extreme drought has affected about 14% of the country per year on average, for the past century. In the Dust Bowl of the 1930s, nearly two-thirds of the country was affected. Climatologists predict that the current drought in the Southeast and Southwest will persist or intensify at least through early 2008.
In October, Georgia declared a state of emergency and sued the U.S. Army Corps of Engineers to stem the release of water from Lake Lanier, Atlanta's primary water source. Water from the lake, which is about 20 feet below capacity, flows via the Chattahoochee River to Georgia, Alabama and Florida.
For nearly two decades, the three states have squabbled over water. After a recent war of words the governors met to talk at the White House. Later, Georgia Gov. Sonny Perdue said he believed the issues could be resolved out of court.
The drought may cause companies in other regions to think twice about buying commercial properties in Georgia as they select sites for growth or relocation.
In a search for solutions, a $1 million pilot desalinization project to remove salt from ocean water is underway near Savannah, and new reservoirs are being built, says Sam Olens, chairman of the Atlanta Regional Commission.
Despite average annual growth of 86,000 new residents since 2000, the water supply can handle growth with the proper conservation measures, says commission spokeswoman Julie Ralston.
But if Lake Lanier's level plummets, the result could be devastating, she says. “If that lake runs out of water, it doesn't matter if we have 50,000 people or 4 million. Those people won't have water.”