Movies, Urban Sprawl & More: The Future Of Atlanta CRE
Influx—this is the key to Atlanta real estate. Booming film, tech and food industries are bringing in thousands of jobs, while empty nesters are leaving the suburbs in droves for city living. Walker & Dunlop Atlanta’s Kris Mikkelsen and Greg Engler spoke with us about the future of Atlanta real estate.
Bisnow: What trends are you seeing in the Atlanta market/overall South?
Kris Mikkelsen: From an investment/sales standpoint, there’s still tremendous liquidity. There's a number of new entrants looking for new avenues to invest in multifamily. Significant private capital is moving into multifamily at a time when institutional capital is becoming more conservative. The growth markets across the Southeast have been a good place to be for a number of years now. That trend will continue.
We'll also see construction starts moderating as construction lending becomes more difficult to come by. This could be a good thing for the long-term health of the market.
Greg Engler: There’s been definite, transformative urbanization in Southeastern cities, creating a demand for apartments from both Millennials and retirees. It resonates with investors as demand for urban projects has increased. However, construction lenders have started to restrict the flow of lending for many new projects, which should put a governor on future supply.
Bisnow: Atlanta and its suburbs now host the third-largest film industry in the world. What are the upsides and downsides you see to the Big Peach becoming the next Hollywood?
Kris: It’s a huge job generator, and it’s creating demand for apartments. The state government is attracting big business with compelling incentives, which in turn is reinvigorating areas that were forgotten in the last cycle. We have dilapidated industrial buildings being repurposed into studios and sound stages. It's brought more recognition and culture to the city, which is positive. It's still a little odd going to the movies and watching Owen Wilson and Vince Vaughn have pizza and beer at the place I used to hang out at while I was at Georgia Tech.
Bisnow: Atlanta is facing an inventory gridlock in housing this year. How different were market conditions in the first and last halves of 2016, and do you predict the gridlock lifting by the second half of 2017?
Kris: Atlanta has faced a shortage of new housing since we emerged from the recession in late 2009. We've added 72,000 jobs over the last 12 months and forecasts call for another 200,000+ jobs over the next three years. In the apartment world, Atlanta's ratio of job creation to unit deliveries is one of the healthiest in the country. That bodes well for units currently under construction, which will deliver over the next 24 to 36 months.
As for the second half of 2017, you'll see more units delivering in our urban centers, especially Buckhead and Midtown. Assuming job creation maintains its current pace, the steady absorption will continue.
Bisnow: Compare the housing market to the state of mixed-use/retail/commercial properties in Atlanta. How do the markets differ? How have they reflected and influenced each other?
Greg: Walkability is such a key factor in thriving urban markets. Absorption rates for urban projects are moving at a quicker pace, and you’ve even started to see the urbanization of suburban markets like downtown Woodstock, Alpharetta and Roswell that have benefited from the migration for more walkable projects.
I think we’ll see higher numbers and quality of amenities as Atlanta attracts empty nesters who want amenities typically found in single-family units. When this development cycle started, we thought we’d build units for Millennials to fill. It’s been a much older demographic than we originally thought, bearing higher levels of discretionary income. So developers are re-engineering units and amenities to cater to that market.
Kris: I grew up here. The cultural, the food and the entertainment scenes have all improved dramatically over the past eight to 10 years. Take Greg's situation as an example—he's 18 months away from being an empty nester. Once the kids are gone, his house in the suburbs may begin to feel a bit isolated. Folks like him, with houses 45 minutes out in gated communities, are moving into town seeking more vibrant neighborhoods.
There is a sense of community in our urban neighborhoods that, in my view, either was not as palpable or simply did not exist in prior cycles. Achieving critical mass of office, retail, housing, recreation—that's all part of the process and each one will feed off the other. Linchpin developments like Tech Square, The Beltline and Ponce City Market have created real places where multiple product types are thriving.
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