There has been a circle of uncertainty at work. The economy has been on shaky ground, the metro area has lost jobs the past two years after several years of record job gains, developers have delayed or cancelled plans for new commercial projects, corporate relocation has slowed and downsizing has created less demand for all types of commercial real estate. All of these factors are interrelated and they lead to the unhappy circumstance of demand discouraging supply.
Recent conditions appear to show real signs of improvement. The Economic Forecasting Center at the Robinson College of Business at Georgia State University paints a good picture.
- The Atlanta metro area is expected to gain 32,100 jobs in 2004, 63,000 jobs in 2005 and 66,400 jobs in 2006. More of these jobs are considered higher-paying than in the past.
- The unemployment rate in Georgia will end the year at 4 percent and should stay at that level for the next two years.
- Both personal income and tax revenue will increase this year and over the next two years.
Hans Hansson, writing for Starboard TCN Worldwide Real Estate, has a theory about the boom and bust cycles that hit commercial real estate. During a boom cycle, tax incentives, coupled with liberal lending practices, encourage investment in new construction, and beautiful new buildings go up. Rising rental rates also encourages upgrades of existing buildings.
When a bust occurs, construction halts, leaving some projects incomplete; others are emptied because business is down and companies go bankrupt, as in the recent dot-com era.
However, the improvements and upgrades have already occurred. This includes not just cosmetic changes but infrastructure improvements as well. ADA (handicapped accessibility), more efficient elevator systems, energy efficiency programs to address air quality, power and lighting, and better security systems are just some of the enhancements that have now been incorporated into both new and existing inventory.
Hansson concludes that rental rates in many major cities have actually declined when you take inflation into account. In addition, a tenant coming in at the end of the cycle enjoys the advantage of perks such as newer fiber optics, improved telecommunication systems, leftover tenant improvements and furniture systems. This leads to greater efficiencies and renewed prosperity.
The bottom line is that if we survive the uncertainty, there are long-term benefits.
Now may be the time to take a look at your current situation. There may be a way to save money, secure a better lease, enjoy more up-to-date office design and new and improved technology.
The smart business owner will call on a commercial real estate associate to help paint a clear picture of how to take advantage of the current cycle.
Jim Costen is regional director of Coldwell Banker Commercial/NRT in Atlanta, a specialty division of Coldwell Banker Residential Brokerage. The division provides commercial expertise, research and brokerage services. Coldwell Banker Residential Brokerage is the No. 1 residential real estate firm in metro Atlanta. The company includes 27 real estate branches plus other specialty divisions - The Condo Store, Builder Developer Services and Corporate Relocation. Coldwell Banker Residential Brokerage is a member of the NRT family of companies. NRT Inc., the nation's leading residential real estate brokerage company, is a subsidiary of Cendant Corp. Reach Costen at (404) 705-1500 or visit www.ColdwellBankerAtlanta.com.