Land & Development Q2 2016
U.S. and Atlanta Market Update
Except for multifamily, construction levels are still low. Some developers are experiencing historically less exuberance from lenders for new projects. “During the first 6 months of this year, construction spending amounted to $539.8 billion, 6.2% above the $508.1 billion for the same period in 2015,” according to the U.S. Department of Commerce.
“For yet another quarter, construction volumes outside of the apartment sector remained stuck on their road to recovery,” according to the Q2 2016 REIS Construction First Glance report.
Apartment construction was “the only property sector with robust new completions during this recovery.” Q2 beat the Q1 2016 record for new completions with 49,132 units completed in the quarter. For the remainder of 2016, another 150,000 units are projected to come online, which would make for a 2016 total of approximately 240,000 units, “a level not observed since the late 1980s.”
For the office sector, Q2 construction registered at 8.6 million SF. This is keeping with the trend of a slow but steady increase in construction for the sector.
For the retail sector, 1.4 million SF were completed in Q2. Severino called grocery-anchored centers the area of strength in the retail market but noted that not only are they difficult to build, but the majority of neighborhoods already have one and don’t need a new one. He also called the South a growth area for retail and although there is more demand for this type of space in this region, that’s not going to have a perceptible impact on national data. The fact of the matter is that the retail recovery looks different than in past cycles due in part to e-commerce and new retail subtypes. The low construction volumes “look to be more of a structural and not cyclical feature of the retail market.”
Nationwide, 287,000 new jobs were added in June and 255,000 jobs were added in July and the unemployment rate remains at 4.9%, down from 10% at the height of the recession, according to the Bureau of Labor Statistics.
This marks a 70 month streak of consecutive job growth, the longest on record, according to The U.S. Department of Labor blog where Secretary Tom Perez said, “American businesses have created a total of 15 million jobs since February 2010.”
There is no shortage of new development in and around Atlanta. The former Herndon Homes site comprised of 12 acres along Northside Drive is going to be redeveloped into a $150 million mixed-use project. Selig Enterprises is planning a 500-acre mixed-use project in LaGrange. Whole Town Solutions’ “Pinewood Forrest” just broke ground on 234 acres in Fayetteville. The plans include 1,200 residences, office, hotel, and retail space. A 43-year-old shopping center, Proctor Square, was just demolished in Duluth, GA to make way for a $64 million redevelopment on an 8-acre redevelopment with a 375-unit apartment complex and 11 retail and office store fronts, the Gwinnett Daily Post reported.
A new report from Irvine, California-based Ten-X, ranked Atlanta as the No. 3 top buy market for multifamily properties,” reported The Atlanta Business Chronicle.
Bull Realty, Inc., Research