The Atlanta retail market remained healthy at the start of 2023. Vacancy rates were essentially unchanged after reaching a historic low at year-end 2022, inching upward negligibly in Q1 to 3.7% while remaining 90 basis points lower than one year ago. Reflecting the national landscape, Atlanta’s retail market is likely nearing a ceiling in terms of occupancy gains to be had this cycle, especially with its extreme supply constraints.
New construction can be expected to remain limited in the coming quarters. Though nearly 600,000 sf is currently underway, due to the uncertain interest rate environment and inflationary effects on new construction costs, new project announcements are waning. Deliveries were subdued in the first quarter of 2023 with construction completing on 90,000 sf of retail product. The most significant delivery of the quarter occurred at Arbor Springs Circle in Newnan where a 48,387-sf Publix completed and opened.
Retail asking rents continued climbing, reaching an all-time high of $18.58 per square foot net on average across all shopping center types in Metro Atlanta. This marks a 9.7% year-over-year increase, a deceleration from the 20% annual increase that was recorded at the start of 2022. Institutional and regional property owners are focused on inflationary pressures and insisting on rental rate increases beyond traditional CPI standards. Percentage rent clauses on retailer sales volumes are increasing, and retailer sales continue to slowly increase from previous levels.
Regional malls, big box shopping centers, and grocery-anchored or unanchored strip centers comprise much of the traditional retail landscape. However, in today’s market retailers also require strategic consultants experienced in both traditional retail and in the new landscape of e-commerce, medical retail, and digitally native brands.
Over the coming months, engaging the expertise of a retail brokerage specialist will be more critical than ever for business owners to navigate the complexities of transactions in this volatile economic climate with confidence.
