The Road to Retail Recovery: The Southeast Rebounds
- May 08, 2013
In order to lead JLL Retail’s local market expansion in the Southeast, my wife and I recently returned to Atlanta from Montgomery, Alabama. We’ve enjoyed getting reacquainted with the city and the retail market in the region, and have realized that the retail landscape is as diverse as it is prevalent. Each market has something different to offer, and when you look at the recovery of retail real estate in cities throughout the region, you see that not all markets are created – or recovering – equally. During our exploration of Southeast retail, three markets stood out as important to the region – Atlanta, Nashville and Charlotte.
HOT-lanta is on its way back
The recession hit Atlanta hard but things are looking up in unexpected places. While more than 200,000 jobs were lost in the recession, approximately 65 percent of those jobs have been reclaimed in a wide range of occupations as well as geographic locations. No longer is the job growth and real estate demand limited to the high-profile areas of Buckhead, Midtown and Perimeter, we’re seeing areas of expansion in Kennesaw, Newnan and Covington.
The retail market was hit especially hard in the downturn, and several shopping centers were foreclosed upon during the past few years – a trend that may continue. Atlanta’s moderately high vacancy equates to low rents and prevalent concessions.
Despite the slowdown, development is minimal and concentrated near the affluent rooftops giving some submarkets breathing room. Retail sales are improving, and retailers are not only surviving but considering expansion which will eventually compress the vacancy. Mirroring a national trend, investors continue to target grocery-anchored centers throughout the metro area. After all is said and done, the long-term forecast for Atlanta is positive due to very desirable demographics that will attract retailers and garner some of the most favorable growth rates among competing markets.
Music City’s attracting more than singers
Nashville is getting on the metropolis map. The market has almost fully recovered from the jobs it lost during the recession, and is thriving with business growth. Nashville’s cost of business is 15 percent below the national average, which continues to attract companies looking to relocate to the metro area, and retains existing companies looking to expand—all of which bodes well for the retail recovery.
Early retail turmoil and closures in 2012 resulted in even higher year-end retail vacancies. Given higher vacancy rates and reduced rents, we do not anticipate any large-scale developments in the pipeline in the near future. Instead, small to moderate-sized projects are being built or acquired. However, the positive job and population growth coupled with growing household income will hold the interest of retailers and shrink vacancy over time.
Queen City: a Crown in the Recovery
Charlotte’s recovering economy is a mere two percent shy of its highest pre-recession employment levels, with annual job growth rates exceeding the national average at 2.5+ percent. This growth is spurring the retail recovery, which will only get better as the state continues to attract major businesses.
Retail vacancy in Charlotte has improved and will continue as consumers ramp up their shopping. Store openings ended on a positive note in 2012 – and power centers in affluent areas enjoy the highest occupancy rates, while the opposite is true in economically-challenged areas. Charlotte’s trump card in attracting retailers is a combination of high population growth and an affordable cost of living.
As I continue my exploration of the Southeast retail market, I’m always interested in hearing what the top markets investors and retailers are targeting. As JLL Retail looks to grow and support our clients in this region, I’m always looking for top talent that understands the local market dynamics and nuances. So if you’re one of the best, then find me at JLL’s booth at RECon, tweet at me @JohnBemis1 – or find me shopping in any one of the Southeast’s great retail markets.
John Bemis is Southeast Retail Market Lead for Jones Lang LaSalle. Contact him at John.Bemis@am.jll.com.