Atlanta’s retail market has been outperforming similar markets, hitting an all-time high in investment activity in the second quarter of 2021.
Meanwhile, consumer demand, sales volume and leasing activity continued to climb through third quarter, with no signs of slowing down through the end of the year.
Sales volume significantly increased by 50.41 percent, totaling over $1 billion from first quarter to second quarter in Atlanta, according to Franklin Street’s Q2-21 Atlanta Retail Report. Sales volume has increased by 91.99 percent since first quarter 2019, indicating a strong market recovery. Average price per square foot also increased quarter over quarter by 6.78 percent. Franklin Street expects this strong investment activity to continue through the year.
Atlanta’s retail market continues to show strong resilience and growth. This historic strength is being driven by high levels of foot traffic and increased net migration as consumer demand has steadily returned to and, in some cases, exceeded pre-pandemic levels, the report noted.
“Activity for all product types of retail, be it net-leased, strip retail, grocery-anchored or power centers, have continued to see stronger and stronger investor interest as the year has progressed. The opportunities we bring to market that would normally receive two or three bids are now attracting 10+ qualified bids from investors,” said Bryan Belk, Senior Director, Retail Investment Sales for Franklin Street.
Leasing activity has recovered across most asset classes, with neighborhood centers leading the pack. Rental rates have grown by 4.64 percent year over year. Overall, the Atlanta retail market continues to be a dominant force with the data pointing to continued resilience and growth relative to other markets.
Q2 2021 Snapshot
5.2% Vacancy Rate
3.9% Atlanta Unemployment
920,199 SF Absorption
$1,048,329,521 Total Investment Sales
Results show the Atlanta retail leasing market thriving. Neighborhood centers, including grocery-anchored centers, outperformed other retail asset types in second quarter, maintaining the highest positive net absorption rate at an absorbed value of 181,693 square feet. Neighborhood centers also saw the strongest increase in foot traffic, exceeding pre-pandemic levels.
Strip centers experienced positive net absorption with a total of 171,107 square feet. Power centers maintained the lowest vacancy rate at 4.3 percent, and represent the largest amount of new retail construction being developed in the market. Regional malls continue to perform among the weakest of retail assets, posting a negative net absorption of -177,715 square feet with a vacancy rate above 20 percent.
“In addition to experience-based retailers, medical users have continued to disrupt the retail market, leasing centrally located, highly visible retail spaces that allow them to provide an elevated consumer experience,” added Franklin Street’s Senior Director of Retail Greg Eisenman.
Other factors contributing to the retail market’s lift include strong foot traffic at retail centers with tenants related to home improvement, electronics, spa and beauty, apparel, groceries and health, which have all surpassed pre-COVID levels. Home improvement has had the highest percentage increase, while leisure, hotels, casinos and dining have lagged relative to other categories.
Atlanta’s market also benefits from a burst in population growth; a recovering unemployment rate of 3.9 percent from a peak of 12.6 percent at the beginning of the pandemic and increases in market rent growth. Large retail projects, including the $5 billion Centennial Yards mixed-use development in South Downtown; the $350 million Exchange @ Gwinnett project and potential entries into the Atlanta retail market from Whataburger and Raising Canes, for example, continue to fuel the market.
“While Kroger has no new net stores in the market planned, we are aware of at least a dozen new-construction Publix-anchored developments in greater Atlanta MSA,” said John Tennant, Senior Director, Retail Investments Sales at Franklin Street.
While the outlook for Atlanta’s booming retail market remains strong for the near term, market participants will likely face the headwinds of construction costs and inflationary pressures for at least the next 12 months. Construction prices remained high in the second quarter.
With the Atlanta market continuously trending toward positive economic fundamentals, this market is poised to outperform other comparable metropolitan markets through 2021 and beyond.
PHOTOS: The team at Franklin Street represents retail tenants like gusto!, which just opened a new store in Chamblee, Freddy’s Frozen Custard & Steakburgers opening across Georgia, Daily Dose Coffee and First Watch which opened at Madison Yards in Atlanta, Hero Doughnuts & Buns which opened in Atlanta’s Summerhill neighborhood, and Serena Pastificio (specializing in authentic Italian cuisine including homemade pasta) and IPIC (a dinner-and-a-movie concept) which opened at Colony Square in Atlanta.
The team also represents landlords and owners in their leasing and investment sales needs. Some of their current listings include Hammond Springs and Perimeter Pointe in Sandy Springs, available for lease, and Eagle Village in Stockbridge, available for sale.