Atlanta Retail Market Summary
Atlanta’s retail market entered this year with the lowest availability rate on record, about 200 basis points lower than the 10-year average. Demand for retail space has outpaced new supply for the past three years in Atlanta, leaving the region with an availability rate of just 3.7%.
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, anchor and junior anchor 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, though total new supply has not kept pace with population growth. The under-construction pipeline amounts to only a 0.2% 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 30% of current under-construction space is available for lease.
Activity has centered around preleased and build-to-suit suburban general retail properties with triple-net leases in place, while mixed-use redevelopment opportunities and experiential retail have been most common in urban areas.
Tenants are absorbing space quickly, and with a shallow development pipeline, high levels of occupancy, and gains in retail sales, pricing power remains with landlords.
Retail asking rents hit a new high of $22/SF, rising 5.7% in the past year, making it a top large U.S. market for rent growth, along with other Sun Belt cities like Phoenix and Charlotte. Still, Atlanta is one of the more affordable large markets in the country.
A tighter lending market and higher interest rates slowed retail investment in 2023. The trailing average four-quarter transaction volume for Atlanta saw a 24% decrease to $570 million compared to the 10-year average. The large deals that recently closed 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 future.
