As the Great Recession and its grisly aftermath fade ever further into the rear-view mirror, Atlanta’s office market is experiencing the soothing effects of higher-than-average job growth and a dramatic spike in its Class A rents. At the same time, the metro area’s embrace of urban, mixed-use development continues to strengthen.
Those were some of the takeaways of JLL Atlanta’s 2015 Real Estate Forecast Breakfast, held Thursday at The St. Regis Atlanta hotel in Buckhead. JLL’s Atlanta Market Director Mike Sivewright summed up the overall mood well in his concluding remarks: “We have a lot of momentum going into 2015.”
By at least one measurement, 2014 was an unusually good one for Atlanta’s office market, noted Juliet Potter, research director for JLL’s Atlanta office, in her opening presentation. That’s because the average Class A asking rent in the metro area jumped by 5.2 percent. The increase is “a stunning number” considering that the Class A rate has risen, on average, only 0.6 percent per year over the past two decades, she said.
Potter also praised metro Atlanta’s recent employment performance, pointing out that the region has, at times over the past four years, exceeded the national rate of job growth by a factor of two or three.
Among the other heartening stats outlined by Potter:
- Metro Atlanta has experienced a 17 percent increase in professional and business services jobs over the last four years, and the number of people employed in this sector is currently 11 percent higher than the metro’s peak pre-recession level.
- Over the past half decade, Atlanta’s Class A office vacancy rate has fallen by 2.5 percent to its current rate of 16.4 percent.
- Of the 31 largest metros in the U.S., Atlanta has the lowest cost of doing business. That dynamic – along with the area’s diverse talent pool, top-notch universities and high quality of life – should continue to make Atlanta an extremely attractive destination for corporate relocations, Potter said.
The growing presence of mixed-use, urban-style development in metro Atlanta was the topic of a panel moderated by JLL Managing Director David Tennery and featuring Art Kepes, CFO of WRS Inc.; Jay Land, a partner at Pope & Land Enterprises; and Paul Morris, CEO of Atlanta Beltline Inc.
Panelists were quick to note that such development isn’t limited any more to intown areas. Suburban markets in metro Atlanta have begun to embrace this kind of development, said Land, whose firm is developing the mixed-use component of the Atlanta Braves’ new stadium in suburban Cobb County.
“Our goal and the Braves’ goal is to create a 365-day experience” with the new stadium, Land added.
Millennials, of course, are a big driver of the trend. “[They] are driving company locations, and they want quality of life,” Morris said. “You can see that in their faces. It’s visceral.”
No longer can employers base their location decisions solely on affordability, Morris noted. Case in point: athenahealth didn’t choose to lease space in the new Ponce City Market “because it was cheap,” but because it’s near where their employees want to live, he added.
“This is a fundamental shift,” Morris said.
Kepes, whose firm recently purchased Underground Atlanta in downtown with an eye towards creating a mixed-use environment, noted that it may take a while for institutional investors’ interest to heat up in his project and others like it.
“Once people’s perspectives of Underground have changed, we’ll see a huge influx of residential” in the surrounding area, Kepes added.
Despite their growing popularity, urban-like, mixed-use projects remain difficult to pull off. “They’re not for the faint of heart,” Morris said, who added that, unlike more traditional commercial development, such projects require “sustained” involvement from the local government.
The breakfast concluded with the distribution of the annual Atlanta Urban Skyline Review, which can also be viewed by texting JLLSKYLINE to 99699.