Atlanta, GA Retail Market Report
Market Overview
Not many retail markets are having more success than Atlanta entering into H2 2023. Tenants are fast-absorbing space, and landlords retain pricing power with a relatively small development pipeline. For now, renters are willing to pay higher rents to be close to Atlanta’s diverse pockets of solid purchasing power, increasing population centers, and recovering office markets where space is still limited. The Atlanta retail market is expected to continue benefiting from significant population growth, although it may still experience a decrease in consumer spending. The owners of underperforming malls in the region are planning substantial redevelopment projects to revitalize their properties. Retail centers in areas with below-average demographic profiles and ground-floor retail spaces in urban districts dominated by office buildings face difficulties finding new tenants to fill vacancies. However, large-scale spaces in high-demand areas remain limited, and there is a long list of potential tenants ready to occupy spaces left vacant by bankrupt retailers.
Highlights
- Since 2022, general freestanding retail has accounted for about 40% of the city’s retail absorption and 60% of construction.
- In the last 12 months, transaction cap rates have risen by over 40 basis points.
- Triple-net asking rents have been steadily increasing over the past three years, and the metro area is witnessing a significant surge in overall rent growth.
- Developers are still focusing on older retail centers situated in prime locations for redevelopment opportunities, many of which now incorporate multifamily components.
Rents | Vacancy | Construction
The limited availability of retail space suggests that vacancy rates and rental prices are likely to remain relatively stable for the time being.
The 12-month rent growth is 7.0%, surpassing the national average of 3.6%. In recent years, the exurban and south metro submarkets have consistently shown stronger performance in terms of rent growth compared to the overall market average. In recent years, there has been limited new construction in these exurban areas, resulting in low availability of rental properties. Due to various factors, such as a diverse economy, positive demographic trends, and limited speculative development, the vacancy rate in the Atlanta metro area has been consistently decreasing in recent quarters. Atlanta’s retail vacancy rate currently stands at 3.7%, which is the lowest it has been in this century.
Currently, the Atlanta market has approximately 2.1 million square feet, which accounts for 0.6% of its existing inventory, under construction. This aligns with the national average of 0.5% and is expected to decrease further in the coming months, as the number of construction projects commencing has declined for the second half of 2023. Notably, over 70%of all retail projects under construction in Atlanta have already been preleased.
Sales
Atlanta, GA, By the Numbers in the Last 12 Months
- Sales Volume: $3B
- Vacancy Rate: 3.7%
- Average Market Rent/SF: $21
- Deliveries in SF: 1.6M
- Net Absorption: 2.8M
- Rent Growth: 7.0%
The majority of transactions completed in 2023 have involved portfolio acquisitions from institutional and international investors, as well as sale-leaseback agreements.
The increase in interest rates and overall economic uncertainty caused numerous retail transactions to be postponed in H1 2023. Based on preliminary data, the total sales volume for the first half of 2023 decreased by over 40% compared to 2022. Currently, the 12-month sales volume stands at $3 billion. The completed transactions mainly involved the purchase of properties for redevelopment, sale-leaseback agreements, or large portfolio deals with institutional or international buyers.
