Atlanta scored a Gold at the 1996 Olympics by focusing international attention on the city, often called “the capital of the New South.” Suddenly, Atlanta and its environs looked appealing to retailers who previously thought it a sleepy Southern town. Now, it boasts four of the country's top 10 fastest-growing counties, according to Marcus & Millichap.
On average, about 87,000 new residents moved in each year during the second half of the 1990s. Even after the tech bubble burst, employment remained high, with 25,200 net positions created last year. Marcus & Millichap expects jobs to increase 3 percent this year, with retail sales increasing 6.2 percent to $71.5 billion, up from $67.4 billion in 2004.
“The Olympics put Atlanta on the map,” says Greg Maloney, president and chief executive of retail for Jones Lang LaSalle, newly named manager of the nearly completed Atlantic Station in Midtown built on the rusty remains of an old steel plant.
In one of the most dramatic new developments, Atlanta's own Cousins Properties Inc. has partnered with Simon Property Group and North American Properties of Atlanta to develop a lifestyle center as part of a mixed-use project. South Point, with 1 million square feet of retail, 500,000 square feet of office space and 1,000 residential units, will be built in Henry County, the fastest-growing county in the area south of Atlanta's Hartsfield-Jackson International airport.
While no tenants have been announced, the first phase of retail is slated to open in late 2006.
Another Georgia developer, Newnan-based Stan Thomas, is getting in on the action. After years of building power and strip shopping centers, Thomas is eyeing lifestyle centers for growth. The company, which scored a success with the Forum Peachtree Parkway in Norcross, Ga., snagged one of the most sought-after properties in recent years. The land and several surrounding parcels in Alpharetta, Ga., had been under contract by Taubman Cos., which later nixed plans for a mall there.
If built, Thomas's Forum Alpharetta will boast 759,000 square feet of retail space, along with 388,000 square feet of office space, a 144-room hotel and 554 residential units. The project — currently under state review as a development of regional impact — is slated to be completed in 2007.
Ease of Travel
A vast transportation network adds appeal to retailers, many of whom operate warehouses in the area. And Atlanta's corporate backbone — including Coca-Cola, Home Depot, Delta Air Lines, Georgia-Pacific, and UPS — has helped attract new companies to the area, such as Newell Rubbermaid and Rayovac.
While Atlanta's glut of office space hurt that sector in the lean years of 2001 to 2003, the retailing and housing sectors barely felt a blip, says Jeff Fuqua, Atlanta development division president with Florida-based Sembler Cos.
For 13 years, Atlanta has led the nation in homebuilding, the National Association of Home Builders said. Its statistics show the median home price increased 4.4 percent to $166,222 last year.
Because of the strong retail market, “construction and land costs are out of sight,” Fuqua says. “There are a lot of factors nipping at your deal, all the time.” In fact, according to Joe Montgomery, senior vice president and director of investment sales with Spectrum Realty Advisors in Atlanta, “cap rates continue to narrow or decline as a result of an oversupply of buyers and undersupply of product.”
Montgomery says grocery-anchored assets that brought 7.5 cap rates in the first half of 2004, achieved 7 cap rates by the end of last year. Just three years ago, grocery-anchored centers brought 9 to 9.5 cap rates, he says.
Still, grocery-anchored centers are white-hot investment properties, says Montgomery, who adds that he saw a dramatic increase in selling activity in the second half of last year.
Development is especially strong in the city. “Atlanta's commuting times, among the highest in the nation, are luring suburbanites back to the city to live, work and play,” says Montgomery.
The Olympics led a revival of Midtown. A new symphony hall is under construction and an expansion of Georgia Institute of Technology's business school, created new synergies connecting downtown Atlanta to thriving Midtown. Most notable, Atlantic Station is rising from a century-old steel mill to a $2 billion mixed-use development on the west side. Jim Jacoby, chairman of Atlantic Station LLC, staged a major play when he and partners began redeveloping the former Atlantic Steel Mill brownfield site on 138 acres.
Come mid-October, the mini-city will officially open its doors to 1 million square feet of new retail space. Some stores will welcome customers earlier, including Ikea, the first in the Southeast, which is set to open in early July.
Other retailers include Dillard's, DSW and Regal theaters, among A-list anchors, along with Pier 1 Imports, Z Gallerie, Jos. A. Bank, Guess, Gap, Banana Republic, Publix Super Market and Express. Restaurants include Copeland's Cheesecake Bistro, Fox Sports Grill, Claddagh Irish Pub and Rosa Mexicano.
Downtown is also growing, though not as fast as Midtown. Condominiums have opened near Centennial Olympic Park. And the area's first aquarium will open later this year, to complement the Children's Museum and Underground Atlanta, which has been returned to its former glory as an entertainment district. The city wants to build a NASCAR museum with support from many of Atlanta's Fortune 500 companies.
Retail in downtown has yet to take off. An empty Macy's store along Peachtree Street, the main drag through downtown, still sits vacant after several years.
While mall development in the late 1990s slowed to a trickle in most U.S. cities, the Atlanta region added four new malls — Mall of Georgia, Discover Mills, Arbor Place and Mall at Stonecrest — bringing the number of traditional malls to 16. They serve a population of nearly 4.9 million people.
Those malls could be the last ones Atlanta ever sees, says Caldwell Zimmerman, executive vice president of Colliers Cauble's Atlanta office. “Lifestyle centers are in vogue,” he says.
Avenue East Cobb, which opened with 230,000 square feet in 2000, was among the first in the region. Built by Atlanta-based Cousins Properties Inc, the “Avenues” concept was quick to gain popularity among consumers and developers. Cousins later opened several others, mostly in the Southeast, including The Avenue West Cobb in Atlanta and The Avenue Peachtree City in, of course, Peachtree City, Ga. Beyond lifestyle centers, redevelopment opportunities have become hot properties, both downtown and in the suburbs.
Beyond lifestyle centers, redevelopment opportunities have become hot properties, both downtown and in the suburbs.
Several malls, reeling from empty store space, plan extreme makeovers. North DeKalb mall, owned by Charlie Hendon, and General Growth Properties' Cumberland and North Point malls. Hendon plans to add Costco and give North DeKalb mall in Decatur a face-lift. General Growth plans to tear down a closed Macy's store and in its place, construct an open-air courtyard for street-front retailers and restaurants at Cumberland mall in Smyrna.
North Point's plans, while still under wraps, could involve much of the same at the Alpharetta property. A Lord & Taylor store recently closed, and General Growth acquired the property from May Co. prior to May's acquisition by Federated Department Stores.
Between downtown and Decatur, Ga., Sembler is redeveloping an old Atlanta Gas Light property in the city's Edgewood section and Lindbergh Plaza, a decaying shopping center just south of the Lenox Square area in Buckhead. Both projects boast big-box tenants and residential units.
At the former Atlanta Gas Light property, Sembler is developing the Edgewood Retail District with 800,000 square feet of retail space and 300 apartment units. Target and Lowe's opened in March, with the remainder of tenants, including Best Buy, Barnes & Noble, and Ross Dress for Less, opening by mid-summer. The project's anchor tenants committed early on, due to the underserved intown market.
Sembler is also revising Lindbergh Plaza, once home to a Kmart store. A $90 million revamp began on the former strip shopping center, which was razed last year. In its place, the company will build 338,000 square feet of retail to include Home Depot, Target and Best Buy. The project will be ready by fall 2006.
By Perimeter Mall, Sembler leveled 750,000 square feet of office space to make way for Perimeter Place, a new $200 million mixed-use complex of 550,000 square feet of retail and 550 residential units.
“It's was good to take down the obsolete office space,” says Sembler's Fuqua. Retailers signed on for the project include SuperTarget, Ross Dress for Less and Loehmann's.
There's one more in-town development Fuqua is eyeing, adding that an announcement is slated for the ICSC Spring Convention in late May. “There are a lot of tenants interested in finding infill sites,” Fuqua says.
Market Profile/Atlanta
DEMOGRAPHIC OVERVIEW
- Population: 4,857,497
- Median home price: $166,222
- Median age: 33.8
- Median household income: $58,568
RETAIL OVERVIEW
- Retail completed (2004): 2.9 million sq. ft.
- Retail sales (2004): $67.38 billion
- Estimated retail sales (2005): $71.54 billion
- Vacancy rate forecast to dip 10 basis points to 9.4 percent by year-end.
- Developers are scheduled to deliver 2.6 million square feet of retail space this year.
- Average rent is expected to climb to $16.93 per sq. ft., up from $16.63 per sq. ft. in 2004.
- Investors are expected to bid prices higher, especially for fast-food restaurants and drugstores, where median prices surpassed $350 per sq. ft.
Sources: National Association of Home Builders, Metro Atlanta Chamber of Commerce, Atlanta Regional Commission and Marcus & Millichap.