After decades of outward expansion, the city of Atlanta is focusing inward again.
Renewed interest in urban working and living began in downtown-adjacent areas like Buckhead, Midtown and Old 4th Ward. Now as prices rise and space becomes scarce in surrounding submarkets, the city’s core is the newest frontier for urban commercial and residential development in the metro Atlanta region.
In the last 10 years, nearly $4 billion in completed real estate investment has been made in downtown Atlanta and another $4 billion worth of development being planned or under construction, according to JLL’s market research. Class A direct vacancy rates have fallen more than 2 percentage points to 18 percent in the last three years, and average Class A lease rates have risen by $10 per square foot in the same period. JLL market stats also indicate that downtown’s residential population has grown an average of 1.95 percent a year since 2010, with nearly 60,000 residents calling downtown Atlanta home.
“The magnitude of the investments is very impressive,” said Mike Sivewright, president of JLL’s Atlanta Region.
Atlanta has faced the same issue that drained urban centers across the country — migration to the suburbs. Unlike sprawl in places like New York and Chicago, though, Atlanta’s sprawl had no geographic impediments, says JLL Director of Research Craig Van Pelt: “It just went out and out and out and it grew so fast that the infrastructure wasn’t there to support that growth.”
But suburban working and living have become increasingly incompatible with changing work-life preferences. Millennials, the next-in-line Generation Zers and even baby boomers are rethinking what’s important to them. They want shorter commutes or no commutes; they want unique workspaces in existing, renovated buildings; and they want to live within arm’s reach of amenities and basic services. “People don’t want to use as many resources,” Van Pelt says. “They’ll give up a little bit on the size of their home in order to live smarter.”
Downtown Atlanta’s renaissance has been fueled by this shift in priorities — and by institutions and companies that see the city’s promise and have made investments that build momentum. Georgia State University, for example, has poured hundreds of millions of dollars into downtown, purchasing and renovating more than 1.2 million square feet of space for academic use and student housing. Corporations like NCR and Anthem are making major financial investments downtown, too. Huge projects like Mercedes-Benz Stadium and in-progress developments like Philips Arena and Underground Atlanta — which is said to be planning the rare urban grocery store — are rounding out development downtown, checking off all of the boxes for people who want the perfect place to live, work and play.
This rebirth comes during a strong period of expansion and return for the nation’s overall real estate market. Atlanta is one of the top 20 markets to watch in 2018, according to the Urban Land Institute’s 2018 Emerging Trends in Real Estate Report. ULI researchers say Atlanta should “continue to benefit from recent corporate relocations, and … is likely to remain attractive to companies considering relocation.”
The energy and activity downtown are certainly attracting outside investors, Sivewright says, noting that a large German investment fund and some major out-of-town retail and commercial developers and investors are buying downtown land and buildings for redevelopment. “The outside world is coming to Atlanta and they’re seeing potential that hasn’t been seen before,” he says.
Downtown’s development is primarily adaptive reuse, which is “a good barometer of urban renewal,” Sivewright says. It creates spaces that attract a diverse mix of residential and commercial tenants, who are the foundation of strong urban areas. “Atlanta is becoming a world-class city,” he continues. “All world class cities have interesting in-town neighborhoods where skilled labor and professional labor and people of all types of economic background live and thrive.”
Sivewright acknowledges that the U.S. is in the late cycle of an expanding economy, which is when real estate typically is at its peak — implying that it could plateau or even begin to decline. But he believes that downtown Atlanta is poised to stay solid despite any larger market shifts. Downtown’s population is growing; its companies are creating jobs; tourism in the city core is booming; and the perception of urban living and working has never been more positive, he says. “I’m not sure anything could slow it down.”
JLL is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. JLL has nearly 300 corporate offices, operations in over 80 countries and a global workforce of over 80,000. Visit jll.com/atlanta.
Heather Martin is a freelance writer for The Business Journals.