Lincoln Property Company’s in-house Research and Valuation departments translate real-time data on local market trends into strategic guidance for our clients.
Development in Atlanta Industrial markets shows few signs of slowing. E-commerce, which now represents about 10% of the total retail pie in the U.S. is the most significant driver of demand in Metro Atlanta and elsewhere. As quickly as new product is delivered to market, it is absorbed. Metro Atlanta delivered 14.8M SF of new supply in 2018. While this doesn’t match peak CY deliveries of 19.2M recorded in 2016, 2018 delivered SF of 14.8M is more than twice the 2009-2017 average. Despite significant new supply, annual net absorption outpaced delivered, coming in at 16.5M SF for the year. Accordingly, occupancy increased by nearly 100 bps to a super tight 93.26%.Published: Feb 20 | 2019 Read More
Northwest turned in a varied 2018. Rate was a high point: At $24.67 combined Class A&B rate, Northwest is up $1.60 YOY, or 6.9%. While Northwest ranks 5th of 9 Atlanta submarkets for rate, it ranks 2nd of 6 suburban submarkets, behind only Central Perimeter.Published: Feb 07 | 2019 Read More
Central Perimeter finished out 2018 on a positive note. At $27.68 combined Class A & Class B rate, Central Perimeter ranks #3 among Atlanta submarkets, behind Buckhead (2) and Midtown (1). Rate increased a respectable $1.53 YOY, which represents a YOY increase of 5.9%.Published: Feb 06 | 2019 Read More
North Fulton turned in a relatively mixed 2018. Rate was a high point: At $24.28 combined Class A & B rate, North Fulton is up $1.16 YOY, or 5%. While North Fulton ranks 6th of 9 Atlanta submarkets for rate, it ranks 3rd of 6 suburban markets, behind only Central Perimeter and Northwest.Published: Feb 06 | 2019 Read More
Midtown turned in an impressive 2018. At $36.63 combined Class A & Class B rate, Midtown ranks #1 among Atlanta submarkets, ahead of even the vaunted Buckhead submarket. Rate increased an astounding $4.41 YOY, which represents an increase of 13.7%Published: Feb 06 | 2019 Read More
Buckhead finished out 2018 on a positive note. At $34.98 combined Class A & Class B rate, Buckhead ranks #2 among Atlanta submarkets, behind only white-hot Midtown. Rate increased a respectable $1.61 YOY, which represents a YOY increase of 4.8%Published: Feb 06 | 2019 Read More
North Fulton turned in a solid quarter for 2Q18: rents are up $1.00, or4.3% YOY; vacancy essentially remained flat, and impressive, at 12.5%; leasing activity was down from prior year same quarter, but at 638K SF, ranked #1 out of Atlanta submarkets. Despite strong leasing activity, net absorption was negative, and down YOY, however N fulton delivered 47K SF in 2Q, and has delivered 296K SF YTD.Published: Sep 20 | 2018 Read More
While rents in Northwest Atlanta are up 4.6% YOY, that appears to be the only good news looking at the chart on the right, as all fundamentals have seemingly softened since 2Q17. With some additional context however, this is not necessarily the case: while net absorption is down YOY, 122K SF net absorption in 2Q is significantly better than the 10 and 5-year averages (2008-2017), of 11K SF/Q and 71K SF/Q, respectively.Published: Sep 18 | 2018 Read More
Class A rents (on a gross basis) in Midtown grew from $36.24/SF in 1Q to $37.19/SF in 2Q, an increase of 2.6%, or 10.4% on an annualized basis. For class B properties, rents increased from $23.87/SF to $26.10/SF, an astonishing increase of 9.3% for the quarter, or 37.2% annualized. If rent is any indicator, Midtown is on fire.Published: Sep 18 | 2018 Read More
Class A rents (on a gross basis) in Central Perimeter grew from $30.44/SF in 1Q to $30.51/SF in 2Q, an increase of 23 bps, or sub 1% growth on an annualized basis. For class B properties, rents increased from $22.47/SF to $22.53/SF, a similarly modest increase. While rent growth seems to have slowed in 2Q, it is worth noting that the CAGR for Central Perimeter from 2014 through 2018 is 5.5%, an unsustainable permanent rate of growth.Published: Sep 18 | 2018 Read More
Downtown office leasing fundamentals continued to improve in 2Q18. Asking rates YOY are up a healthy 9%, and QOQ by 1.9%. Vacancy continued to decline in 2Q, and is approaching historic lows. With vacancy at 10.4%, Downtown ranks second in Atlanta (behind Midtown) for vacancy. Net absorption was an impressive 128K SF in 2Q, marking the fourth consecutive quarter of positive net absorption, and ranking Downtown 1st for net absorption in 2Q18.Published: Sep 18 | 2018 Read More
Buckhead office leasing fundamentals showed improvement during 2Q18. Rates are up $0.37, or 1.1% from 1Q18. Net absorption is positive for the third quarter in a row, at 112K SF. Vacancy is down 70 bps YOY. There are no projects under construction at end of 2Q18, and only 139K SF delivered in the past 12 months, limiting supply for the foreseeable future. Significant 2018 transactions include Aon:65K SF at Three Alliance, Coyote Logistics: 48K SF at Armour Yards, and WeWork: 48K SF at Terminus 100.Published: Sep 18 | 2018 Read More
During the current economic cycle, metros across the nation have seen of a new type of development emerge. These developments feature mixed-use, urban-esque environments that emphasize density and walkability, in a suburban setting. Remarkably, these developments experience significant pre-leasing activity, at rental rates closer to urban, infill development, than their suburban neighbors. In Atlanta, office space in these developments outpaces next-door developments by as much as $10 per square foot, a 35% premium in what has historically been a tenants’ market. What is driving this phenomenon?Published: Feb 21 | 2018 Read More
Atlanta’s Northwest saw rapid growth in 2017, due in part to the momentum surrounding The Battery at Suntrust Park. Not only was the Northwest one of the few markets to actually see
an increase in Net Absorption in 2017, average asking rates also saw a ‘Braves Bump’ in 2017, increasing by $1.53 PSF year over year.
In 2017, North Fulton ranked 3rd overall among major metro markets with nearly 300k SF in positive net absorption. However, this was not enough to offset the effect of 357,575 SF of deliveries, which actually pushed up North Fulton’s marketwide vacancy rates despite positive net absorption. Although leasing activity fell when compared with 2016’s levels, this is partly due to North Fulton’s remarkable 12% vacancy rate, which is incredibly low for a true suburban market.Published: Feb 12 | 2018 Read More
Over 2017, Midtown led all Atlanta submarkets in rent growth, as average asking rates rose $3.47 PSF during 2017. Midtown also saw 286,290 SF of positive net absorption, pushing vacancy below nine percent by the end of the year. Although leasing activity remains strong, overall net absorption fell by nearly 500,000 SF in 2017 when compared with 2016’s figure.Published: Feb 12 | 2018 Read More
Although Central Perimeter finished 2017 with negative net absorption and low rate growth, Atlanta’s largest Class A Market led all submarkets in one important category: Leasing
Activity. With 1.9M SF of deals signed in 2017, Central Perimeter outpaced second place North Fulton by 22%. Although sublet space ranks #2 behind Atlanta’s Northwest submarket, this figure fell by nearly 50% YOY when compared with YE 2016.
Although Buckhead’s robust post-recession rental rate strength continued into the fourth quarter of 2017, rate increases moderated somewhat when compared with 2014- 2016’s astounding growth levels. Net absorption and leasing activity continue to remain slow as the trend to higher office densities is directly impacting absorption. Buckhead’s geographic core projects to remain relatively stable with only two parcels available for new construction projects.Published: Feb 12 | 2018 Read More
Development in Atlanta Industrial markets is not slowing down. The Atlanta airport has been able to handle the large quantities of e-commerce which has made Atlanta, specifically the I-85 S /
Airport submarket a hub for construction. In fact, that submarket accounts for 42.2% of all under construction properties over 50 KSF. Most of these properties break ground without a tenant.
However, due to high demand for these large warehouse spaces, the buildings are leased at the time of delivery.
2017 and the start of 2018 have seen a huge rise in co-working space in Atlanta. In fact, almost 20% of net absorption was generated through co-working tenants. Just within the last month, there were two deals signed: WeWork at Terminus – it’s second Buckhead location – and Office Evolution in Alpharetta. However, Atlanta is no stranger to co-working spaces. Industrious has a location in Ponce City Market, WeWork has two locations in Midtown, Spaces by Regus has inked deals all over the CBD.Published: Feb 01 | 2018 Read More
Real Estate’s old adage—“location, location, location”—takes on different meanings in different markets. In markets such as New York and San Francisco, physical constraints create price pressures that alter economic fundamentals during a recovery. These low-availability markets recover quickly, yet stall out as economic recoveries mature. By contrast, markets such as Atlanta and Dallas have few physical barriers to construction.
Although markets like Atlanta and Dallas take longer to recover, they accelerate as the economic recovery matures, with strongest growth figures occurring toward the end of the cycle. Supply is key to this behavior, and the reason why fundamentals in Atlanta look poised to overtake Dallas soon.Published: Jan 19 | 2018 Read More
Retail in the U.S. is undergoing a dramatic change as lifestyle and consumption preferences shift away from brick-and-mortar stores, toward digital shopping experiences. Over the last few years, the victims of this trend—mostly big box retailers and power center tenants—have been forced to downsize, and in some cases, declare bankruptcy as consumers disappear and sales dwindle.
However, one category of retail—the food hall—has not only survived this trend, but has thrived, as consumers increasingly gravitate towards these collections of boutique ‘fast casual’ restaurants with shared seating. As consumption preferences continue their shift towards digital alternatives, what exactly draws consumers to food halls?
e-Commerce—also known as online retail—represents a fundamental change in the retail consumption model. The switch from “bricks to clicks” has driven unprecedented demand for distribution and logistics space throughout the United States. This demand has pushed the national industrial market into a super-cycle in which industrial fundamentals have bested historic records every year since 2013.
As of 2Q 2017, Atlanta is on pace to absorb 25.5 MSF before year’s end. That figure represents 25% more net absorption than it did in 2014, when it absorbed 19.7 MSF—the previous high-water mark of this cycle—and well above the Metro Region’s all-time best of 20.2 MSF, reached in 1998.
Commercial Real Estate (“CRE”) fundamentals in Atlanta have been a hard sell for the last twenty-five years. Average rents for Office buildings in Atlanta have only increased by $1.88 per square foot—less than the rate of inflation1 —while average industrial rents have increased by only $0.70 per square foot. This phenomenon has a simple explanation: low construction costs, cheap land, and rapid arterial highway construction incentivized an “outward,” low-density growth model. Developers would buy cheap land one exit out, build brand new buildings, and scalp existing tenants by offering new construction at identical rental rates to preexisting product. This dynamic seemed as though it would continue indefinitely.Published: Jan 19 | 2018 Read More
Although so-called “Creative Office” space comprises just 1.2% of Atlanta’s total office market, it represents the most important change in space use since the invention of the cubicle. Tenants and landlords have only begun to leverage Creative Space design principles to push rents past levels previously thought possible, while increasing worker productivity and satisfaction. Trends in this sector will define the American workplace for decades to come.Published: Jan 19 | 2018 Read More
In recent years, we have witnessed the emergence of a new category of Office Space. Called “Creative Loft” space, this category of Office Space features expansive floor plans with large amounts of open space, often incorporating exposed duct work and sprinkler systems. These spaces are specifically designed to facilitate creative interaction—the primary value driver of a new breed of Office User. The highly-valued TAMI subset of office users—Tech, Advertising, Media, and Information tenants—prefer these spaces because these spaces enhance the TAMI business model. TAMI companies’ high profit margins and strong growth models, coupled with their strong preference for these spaces drives significant demand for these spaces.Published: Jan 19 | 2018 Read More
The Atlanta Industrial market has shown consistent improvement during the most recent cycle. Atlanta’s lack of natural barriers to construction, robust transit infrastructure, and low cost of doing business have made it the go-to location for logistics-focused tenants. Over the last three years, Atlanta’s industrial market has absorbed over 65 MSF of space while only adding a still-impressive 44 MSF of new space. Although average cap rates are higher than the rest of the nation, Atlanta’s average cap rate of 6.04% is skewed by the number of older building trades, which have cap rate that are on average +/- 120 bps higher when compared with new construction.Published: Jan 09 | 2018 Read More
In 2Q 2017, Atlanta’s industrial market continued its remarkable run, tallying nearly 6 MSF of positive net absorption after posting 5.6 MSF of positive net absorption in the first quarter. During the first half of 2017, 11.6 MSF of positive net absorption came against only 7.4 MSF of delivered product, pushing vacancy down to 6.9% market-wide. This has resulted in the lowest vacancy seen since Atlanta’s post-Olympic boom.Published: Jan 09 | 2018 Read More
Demand for smaller portable devices, such as laptops or cell phones has created advances in communications infrastructure, such as high-speed fiber optic lines and 5G cellular networks. As the devices became more compact and business began to use them for more tasks, digital service providers shifted resource-intensive data operations from the devices that display the content—computers, laptops, tablets and phones—to massive collections of servers. What does these changes mean for the future of CRE?Published: Dec 20 | 2017 Read More