A diverse culinary scene and burgeoning shopping centers are bolstering Atlanta’s retail sector, but there’s not enough space for everyone, and it’s increasingly unaffordable for tenants.
The Atlanta area’s retail vacancy fell to a record-low of 3.4 percent in the fourth quarter, the Atlanta Business Chronicle reported, citing data from Colliers.
While the low vacancy rate looks good on paper, especially with the increase of e-commerce since the pandemic, it’s also a culmination of prolonged imbalance between supply and demand.
“It is the most competitive market I’ve ever seen in my career,” Amy Fingerhut, senior vice president in CBRE’s Atlanta Retail Services Group, told the outlet.
Factors such as population growth, favorable cost of living, weather and relatively low wages make it an attractive destination for retailers and restaurateurs alike, Fingerhut said.
However, the dearth of available space is hampering expansion efforts. High construction costs have curtailed retail development. Under 700,000 square feet of retail space was added to the Atlanta area in the fourth quarter, while tenant demand outstripped supply, with approximately 1.4 million square feet of net space leased.
Small storefronts, under 1,800 square feet, and larger spaces, exceeding 15,000 square feet, are particularly elusive, as tenants compete for prime locations. Areas like Buckhead, Midtown and those adjacent to the Atlanta BeltLine are especially sought after. Demand is also robust in buzzing suburban hubs like Central Perimeter and Alpharetta.
The imbalance is further reflected in soaring rental rates, which have increased by 29 percent since the beginning of 2021, the outlet reported. Fingerhut cautioned that continued escalation could render rents unaffordable for some tenants, potentially leading to a cycle of vacancies and subsequent financial strain for property owners.
“I don’t see [rents] continuing to rise any more than where they are, because they’re already too high in a lot of submarkets,” she said.
—Quinn Donoghue
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