Southeast Real Estate Business

OCT 2016

Southeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Southeast United States.

Issue link: http://southeastrealestatebusiness.epubxp.com/i/735102

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26 • October 2016 • Southeast Real Estate Business www.REBusinessOnline.com M A R K E T H I G H L I G H T: AT L A N TA RETAILERS TRY TO KEEP UP WITH ATLANTA'S DYNAMIC CONSUMER POPULATION To understand the state of retail in Atlanta in 2005, you first looked at where and what developers were building, then to where retailers were locating and lastly to how consumers were shopping. Simply put, if a devel- oper built it and a retailer occupied it, the consumer was sure to shop there, but that's no longer the case. To un- derstand the state of retail in Atlanta today, you need to start with the At- lanta consumer. Go Big or Go Home From 2000 to 2010, the Atlanta Re- gional Commission reports metro At- lanta added over 1 million residents with an additional 2.5 million people projected to be added between 2015 and 2040. Further, according to a study by the University of Georgia, half the state's population growth is concentrated in just three Atlanta met- ro counties — Fulton, Gwinnett and Forsyth. A big driver for the growth is jobs, especially those in high-paying sectors like information, professional services, science and technology. EMSI reports that two of the counties mak- ing up Atlanta's metropolitan area, Forsyth and Coweta, are in the top eight of large counties for skilled job growth. Additionally, Forbes claims Atlanta is now growing its business service sector faster than New York, Chicago and Los Angeles. Another important population driver is education, and according to Niche rankings, Fulton, Gwinnett and Forsyth counties are in the top five county school districts in metro Atlanta. Cobb, DeKalb, Fulton and Gwinnett counties make up nearly 60 percent of metro Atlanta's population. These uber-performing, higher den- sity markets will continue to experi- ence robust residential growth, higher barriers to entry, lower vacancy, high- er rents for retail (eclipsing $50 per square foot in some places), stronger retailer demand, easier sources of fi- nancing and increased private invest- ment. Typically, there is also a strong correlation between population den- sity and higher retail sales. As land costs continue to increase, the need for more residential projects will further fuel the vertical mixed-use trend. Completed projects such as Avalon in Alpharetta and Ponce City Market in Atlanta's Old Fourth Ward district have been much-heralded highlights of the integrated residential/consum- er experiential development move- ment, with additional large format developments such as Halcyon and Colony Square in Fulton County, The Battery Atlanta in Cobb County and the GM Assembly in DeKalb County about to come on line. While most new projects will not be of the same size and scope, many will attempt to recreate similar experiences. Who's Your Daddy? While Millennials tend to get all the media attention and the 10 to 29 age group makes up the largest segment of the population at 28.2 percent, we cannot ignore the fact that the 45 to 65 age group makes up the second largest segment at 25 percent. From 2000 to 2010, that segment grew by 5 percent while the 10 to 29 age group actually shrunk by 1.5 percent of the overall population. While the trend for younger resi- dents is to move closer into town, 60 percent of all residents aged 10 to 29 still live outside the city. We'll also see a more diverse residential population as non-whites and Hispanics made up 91 percent of all new residents from 2000 to 2010. Per capita income is highest in Fulton, Forsyth and Fayette counties, although this is less relevant as it is easier to merchandise around income — whether a retailer or landlord — than a lack of population density. Although population density is the leading stimulant for the creation of additional retail gross leasable area (GLA), age, race and income are equal- ly relevant drivers. An aging popula- tion looks for convenient bricks and mortar retail, services, medical facili- ties and entertainment. Grocery categories including tradi- tional (Kroger and Publix), specialty (Whole Foods/365, Sprouts Farmers Market and Trader Joe's) and promo- tional (Walmart, Aldi and Lidl) will continue to be a weekly destination of choice and an important catalyst for new development. Fueled by an aging population and up to 30 million new Affordable Care Act patients, medical uses will also continue to be woven into the retail fabric to include uses such as urgent care, family practices, dentists, physical therapy and chiro- practors. Millennials will continue to look for convenient retail in a blended brick and mortar/online format, but will demand a unique dining, shopping or entertainment experience. If bricks and mortar cannot provide this in a fluid and flexible format, this con- sumer group will continue to increase their tendency to shop online. These uses include chef-driven con- cepts like Superica, Barcelona, JCT Kitchen, The Optimist, BeetleCat, Heirloom BBQ and Breadwinner, as well as unique fashion brands like Factory Girls and lululemon athletica. Millennials are also looking for multi- format entertainment venues like Movie Tavern, Slingshot, Main Event, Escape Room and Sky Diving, as well as specialty fitness concepts like Or- ange Theory, Flywheel, CrossFit and Pure Barre, all with a seamless inte- gration with social media. The challenge for retailers and de- velopers will be in staying ahead of a constantly evolving Millennial con- sumer base by turning merchandise quicker, using technology to reach the consumer more effectively and chang- ing menu items with frequency, all in an environment that provides a sense of fun and theater. Regardless of age, race or income, there is a strong desire for a sense of community, familiarity, comfort, sense of belonging and prideful support. Local communities who have suc- cessfully accomplished this include Roswell, Vinings and Woodstock. In fact, if you have been to downtown Roswell on a Saturday night recently, you have seen a vibrant, walkable community that transcends age, race and income. Communities such as Sandy Springs, Suwanee, and cer- tainly the developments along the Beltline are also creating similar ex- periences for their local and visiting consumers. Can You Handle the Truth? Bricks and mortar retail is alive and well in Atlanta. Provided sup- ply and demand fundamentals are in balance, bricks and mortar will con- tinue to thrive as long as retailers and landlords are creative and nimble and offer consumers what they are looking for. Jonathan Dubovsky Partner, The Shopping Center Group COLLABORATIVE REAL ESTATE SERVICES Learn more at FranklinSt.com The challenge for retailers and developers will be staying ahead of a constantly evolving Millennial consumer base.

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