Atlanta Retail Market Summary
Demand for retail space has outpaced new supply for 12 straight quarters in Atlanta, leaving the region with a record low availability rate of 3.4%, well below the national average. Tenants are absorbing space quickly, and given a relatively shallow development pipeline, high levels of occupancy, and gains in retail sales, pricing power remains with landlords. Tenants are willing to pay higher rents to be near Atlanta's varied pockets of strong buying power, growing population centers, and recovering office markets where space remains scarce.
Retail asking rents hit a new high of $22.00/SF, rising 7.0% in the past year, making it a top-10 U.S. market for rent growth, along with other Sun Belt cities like Phoenix and Orlando. Still, Atlanta is one of the more affordable large markets in the country.
Strong population growth should continue to boost the Atlanta retail market in the near term, though pockets of weakness remain. The owners of some of the region's underperforming malls are planning major redevelopment projects, and retail centers in areas with below-average demographic profiles as well as ground-floor retail spaces in office-heavy urban districts face challenges backfilling vacancies. On the other hand, large-scale space availabilities in high-demand areas remain limited, and a long list of potential tenants stand ready to fill space vacated by bankrupt category killers. For example, Burlington has already assumed the leases on four of the market's 16 former Bed Bath & Beyond spaces.
New construction has largely followed new rooftops into the northern suburbs like Roswell, Alpharetta, and Lawrenceville, though total new supply has not kept pace with population growth. The under-construction pipeline amounts to only a 0.3% expansion of total inventory, and more space has been absorbed than supplied every year over the past decade except for 2020. That's brought availability down to a historic low, with even lower availability in power centers and freestanding retail. About 95% of retail square footage delivered since 2020 is leased, while just over 20% of current under-construction properties are available for lease.
General freestanding retail has accounted for about 35% of absorption and nearly 80% of construction since 2022. Activity has centered around preleased and build-to-suit suburban properties with triple-net leases in place, while mixed-use redevelopment opportunities and experiential retail have been most common in urban areas.
The $449 million in sales in 23Q4 was an 71% decrease from the record-setting peak of over 1.5 billion in 22Q2. Despite this, Atlanta is in the top five markets nationally for 12-month sales volume, outperforming its rank by asset value.
A tighter lending market and higher interest rates slowed retail investment in 2023. The trailing average four-quarter transaction volume for Atlanta saw a 22% decrease to $517 million compared to the 10-year average. The large deals that closed in 2023 include grocery-anchored developments, community and neighborhood centers in the outer suburbs, and a regional mall.
In the longer term, continued population growth in the Atlanta area and broader Southeast provides the market with the demographic fundamentals to weather difficult macroeconomic conditions, and the relative scarcity of retail space bodes well for stable vacancy rates and rents for the foreseeable futu
