Atlanta Commercial Real Estate Investment

In the heart of the American South lies a city that resonates with history, innovation, and economic growth – Atlanta. This vibrant metropolis has become an alluring hotspot for commercial real estate investors seeking to ride the wave of opportunity. From the bustling urban landscape to its steady economic growth, Atlanta's commercial real estate market offers a promising avenue for those looking to make their mark in the realm of investment. In this comprehensive guide, we'll delve into the Atlanta commercial real estate market.

If the objective is to enhance the performance of your real estate portfolio, delving into the realm of structured debt within the commercial real estate sector can offer significant advantages. What distinguishes this approach is its reliance on stable and dependable cash flow. This is produced by fixed-interest payments. This serves as a robust foundation for investments centered around debt. Irrespective of market oscillations, borrowers consistently fulfill their monthly obligations. Thereby, fortifying the integrity of your investment's value.

Exploring the Commercial Real Estate Landscape in Atlanta

  • Atlanta, a juxtaposition of Southern charm and urban refinement, stands as Georgia’s vibrant capital.
  • It is renowned for its storied history and diverse culinary panorama. It also has internationally acclaimed landmarks and a thriving realm of entertainment and arts. Thus, it emerges as a melting pot of cultures that consistently delights.
  • The city's ongoing population expansion serves as evidence of its allure. It also remains a significant catalyst for its economic vibrancy.
  • The relationship between population growth and economic advancement is intricately interwoven, with each exerting a profound influence on the other. 
  • With the population surge comes an expansion of the workforce, igniting increased demands for services and goods, consequently propelling the wheels of economic prosperity. On the flip side, economic development draws more individuals, fostering a cycle of population growth and amplifying the city's dynamism.
  • This cycle of growth establishes a lively and energetic atmosphere that nurtures innovation and entrepreneurial endeavors, rendering Atlanta an attractive choice for investors in commercial real estate, business proprietors, residents, and tourists alike.

Atlanta's Regional Analysis

  • Long-Term Attraction: Atlanta has consistently drawn new residents over the long term, resulting in its metropolitan region ranking among the nation's fastest-growing. This growth trend persists in the short term, with Atlanta annually witnessing a noteworthy increase in residents.
  • Driving Factors: The city's enduring growth can be attributed to its strong economy, flourishing job market, vibrant cultural offerings, and superior quality of life.
  • Population Figures: Atlanta boasts a population of 499,000 within the city itself and an impressive 6.1M in the larger metropolitan area.
  • Metropolitan Ranking: Metropolitan Atlanta claims the 8th spot among the largest metro areas in the US, encompassing notable cities like Sandy Springs, Roswell, Alpharetta, and Decatur.
  • Population Surge: Since 2010, the population has increased by almost 19%, showcasing the region's undeniable allure.
  • Future Projections: Projections anticipate that Atlanta will reach a population of 7.9M by 2050, indicating ongoing growth.
  • Dominant Counties: The most populous counties in the area include Clayton, Cobb, Gwinnett, Dekalb, and Fulton.
  • Median Age: Atlanta’s median age is 37.2 years, slightly lower than the national median.
  • Income Indicators: The per capita income stands at $39,904, approximately 10% more than Georgia's average. Additionally, the median household income stands at $77,589, a notable 20% above the state's overall median.

Job Market of Atlanta

  • Diverse Industry Mix: The growth of Atlanta's job market is rooted in a wide spectrum of industries, further bolstered by the substantial representation of both Fortune 500 and Inc. 5000 companies. 
  • STEM Emphasis: The metropolitan area of Atlanta boasts a skilled and educated workforce, with a pronounced emphasis on STEM careers. This orientation cements its position as a significant economic hub within the United States.
  • Strong Economic Figures: The GDP is almost $474B, showing steady growth over the last two decades based on St. Louis Fed data.
  • Unemployment Rate: The rate of unemployment stands at 3.3% as of May 2023 (BLS data), with more than 3.1M individuals employed in the labor force.
  • Key Industries: Notable sectors include healthcare, life sciences, cleantech, technology, creative industries, advanced manufacturing, and supply chain.
  • Corporate Headquarters Hub: Atlanta serves as the headquarters location for 31 companies listed in the Fortune 500/1000 rankings, exceeding 200 companies featured in the Inc. 5000 list, and accommodating over 330 headquarters for international businesses across the United States and North America.
  • Major Employers: Prominent employers include Home Depot, Piedmont Healthcare, Northside Hospital, Delta Air Lines, and Emory University.
  • City Rankings: According to WalletHub's research findings, Atlanta ranks as the fourth most favorable city for STEM professionals and holds the 24th position among the best cities for jobs in the United States.

Office Market of Atlanta Q2 2023

Source: Colliers 

  • The office sector in Atlanta is witnessing a persistent increase in vacancy rates throughout the market. 
  • Only Midtown, South Atlanta, and West Atlanta reported positive absorption in the second quarter. As businesses reassess their workspace needs, the ongoing inclination towards optimizing size and emphasizing flexible work arrangements remains strong. 
  • The comprehensive office vacancy rate has now reached 17.8%, surpassing the previous peak of 17.5% in 2010, and establishing a new pinnacle for the metropolitan region. In the current landscape, tenants are expected to maintain a favorable position, encountering competition for desirable locations.
  • Vacancy rates have been prompted by negative net absorption of 1.7 million square feet during the quarter. 
  • The availability of sublease spaces has notably risen by 57% since the commencement of 2022. 
  • While asking rates have maintained stability at $33.40 per square foot, the ascendancy of tenant concessions offered by landlords has offset this stability. 
  • Notably, the focal point of development activity resides in the Urban Core, with a substantial 2.2 million square feet currently under construction.

Industrial Market of Atlanta Q2 2023

Source: Savills

  • During the second quarter of 2023, Atlanta's industrial sector exhibited signs of easing. 
  • The overall vacancy rate, witnessing its fifth consecutive quarterly increase, expanded by 30 basis points, climbing from 5.1% in Q1 2023 to 5.4%. Considering the prevailing economic uncertainty and the notably high rental rates, the projection is for the vacancy to continue its gradual expansion over the forthcoming quarters. It's worth highlighting that even with the anticipated rise in vacancy, it remains noteworthy that it still hovers around historic lows within the Atlanta market.
  • Despite this broader rise in vacancy across the market, rental rates experienced a 4.4% surge from Q1 to Q2, ascending from $6.18 to $6.45, primarily attributed to the escalating average cost basis of industrial structures. 

Retail Market of Atlanta Q2 2023

Source: Lee & Associates

  • Atlanta's retail market experienced a deceleration in activity during Q2, yet it maintained a positive overall trajectory. 
  • The net absorption, totaling over 45,000 square feet, marked the lowest level of demand observed in nearly a span of two years. The region's resilient economy, coupled with encouraging move-in patterns and a scarcity of large-scale speculative offerings, exerts downward pressure on vacancy rates, which persist at a historically low level of 5.1%. 
  • New retail space, totaling less than 900,000 square feet, has been introduced to the market in the last eighteen months, and the current under-construction space measures less than 730,000 square feet. As more employees return to workplaces, an augmented foot traffic flow is anticipated to bolster demand for restaurants and retail outlets in Atlanta and its surrounding population centers. 
  • Reflecting this scenario, average retail asking rents have ascended by 7.1% year-over-year, culminating at $17.90 per square foot by the conclusion of Q2.

Bottom Line

Atlanta's commercial real estate market presents an alluring landscape for investors seeking to capitalize on economic dynamism, population growth, and diverse industries. From the office spaces that drive innovation to the industrial properties that facilitate logistics, and the retail centers catering to a culturally rich population, the opportunities are manifold. As the city's story of growth continues to unfold, smart investments today can yield promising returns for years to come.

Recognized as a leading alternative investment platform, Assetmonk distinguishes itself through its exceptional proficiency in the complex realm of structured debt within the commercial real estate sphere. Offering an approachable entry threshold from as low as $12,000, Assetmonk takes considerable pride in providing distinct and personalized investment opportunities to its esteemed community of investors. By leveraging the comprehensive capabilities of the Assetmonk platform, investors are granted the opportunity to visualize a substantial Internal Rate of Return (IRR), scaling an impressive peak of 17 percent.

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