Atlanta a poor choice for real estate investing, report says

All the construction activity in Buckhead is “goofy.”

That description comes not from a disgruntled neighbor but the Urban Land Institute, a national organization of developers, many of whom are in Atlanta.

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Renee' Hannans Henry/AJC

Buckhead absorbs less than 500,000 square feet of office space annually, but more than 2 million square feet is under construction, the report said.

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ULI presented its annual Emerging Trends in Real Estate Report on Tuesday and once again Atlanta is portrayed as overbuilt and not a particularly attractive place to invest.

In a ranking of 50 metropolitan areas, Atlanta came in at 33 for commercial and multifamily development, 24 for commercial and multifamily investing, and 33 for home building. The last time Atlanta ranked at the top was 1995.

Next year “promises tough times [in Atlanta] as an overbuilding hangover and slipping demand roil investors,” states the report, now in its 30th year. “It’s no time to buy in any of the property sectors. Office developers play a game of chicken in Buckhead, where a bloodbath is coming.”

Buckhead absorbs less than 500,000 square feet of office space annually, but more than 2 million square feet is under construction, the report points out.

“The goofy activity defies description.”

The principal author of the report, Jonathan Miller, who lives in New York, addressed ULI Atlanta members Tuesday morning at the Cobb Energy Performing Arts Center.

As for the perception that Atlanta is overbuilt, “given what’s going on in Buckhead right now, I think it sticks,” said Miller, who has spent time walking and driving around the city.

A chunk of Buckhead along Peachtree Street is dirt because of the Streets of Buckhead, a $1.5 billion mixed-use development that will have luxury retail.

A project like that might be facing trouble if current conditions persist, the report indicates. “Inflation and energy costs eat into retail sales” next year, Emerging Trends predicts, “while the unsettling jobs picture and housing woes unnerve most shoppers. After a decades-long boom, the retail bone yard fills up again.”

As a sort of counterbalance to the pessimistic report, panelists discussed why Atlanta is a great place for real estate.

Two of the panelists work for companies adding to the Buckhead office glut: Tad Leithead, senior vice president with Cousins Properties, and Lyle Fogarty, vice president of development with Crescent Resources.

Cousins Properties is building Terminus 200 and Crescent Resources is putting up Phipps Tower.

Leithead, the moderator, said in order to solve growth problems such as clogged roads there needs to be greater involvement at the highest levels of state government. With local governments and elected leaders following different drummers, regional solutions are much more difficult, the development community says.

That prompted Sen. Judson Hill (R-Marietta) to approach the panel. “We have a crisis,” Hill told the panel and audience. “We haven’t had a plan at the state level in decades.”

The consultant McKinsey and Co. is expected to soon unveil the results of its $2 million transportation funding study. Plunging state revenues and transportation funding are the two biggest issues facing the next General Assembly, Hill said.

Despite the generally negative view of Atlanta, the 2009 Emerging Trends Report is fairer than last year’s, which didn’t mention the surge in intown development, said Jeff DuFresne, executive director of ULI Atlanta.

Annoyance with traffic and the desire for convenience over space are spurring migrations to the city’s core and spawning 24-hour neighborhoods.

The latest report “does capture the subtleties of what’s driving our future,” DuFresne said.

Comments

By Rudy

Nov 29, 2008 10:01 AM | Link to this

I wouldn't invest a nickel in Atlanta for any reason. An out of control spending machine, Atlanta City government has spiraled down into the abyss! Any time a mayor furloughs firefighters and police officers while still touting some boondoggle called the "beltway" something is very,very wrong. Stay away for your own good! (and you thought Bill Campbell was a bad mayor!)

By hook or by crook

Nov 20, 2008 10:11 PM | Link to this

You don't realize what a multicultural hellhole Atlanta has become until you get out of it. Why did I wait so long to leave? If you don't NEED to be there, find yourself a nice small community where you can get to know your neighbors and where there are children and old people. Stay out of Atlanta or other large cities. Enjoy your life and avoid the treadmill of the modern city.

By stevie

Nov 19, 2008 1:08 PM | Link to this

Will Jones, who are you, man? Do you just enjoy spewing lucicrous mutterings and rambling on ad infinitum vomiting SAT words and concepts you really don't comprehend? "Atlanta has the best traffic..." -- are you on drugs on Memorial Drive? Hey, go back to Jr. High Civics class and then on to a course in American History. Then try Western Civ...or better yet, something more than a 9th grade education. Wait til Hillary gets to be Sec of St and she and Bill run amok again with crooks and criminals, putting this country into more turmoil and into the palm of terrorists. Then we'll see how well you understand Fascism and Obama's Utopian ideals. yeah right.

By Yankees Here We Come

Nov 18, 2008 9:45 AM | Link to this

With all the Yankees getting laid off in the North East they will all be moving to Atlanta where they will be amazed by the inexpensive housing, low state tax, and the lack of intelligence of the general population.

Have no fear once again the Yankees will save the day as always.

By jm

Nov 17, 2008 10:26 AM | Link to this

Long live free markets!!

You issue a building permit because someone asks for one numbskull. We don't live in a communist society!! (at least I hope)

What has happened to America?

By Dr Scottie

Nov 16, 2008 12:28 PM | Link to this

Attention Bargain Shoppers ITP

The condo and office building craze will hurt everyones property value here in Atlanta. Why was the city issuing building permits. So, if you buy in Atlanta - this will probably happen to you. Just another reason why the current Atlanta City Hall is turning the city into an empty Ghetto, and everyone is moving Outside the Perimeter.

By atlbelle

Nov 13, 2008 1:00 PM | Link to this

Better be careful with your manic plan Dugan. That driveway was dug up and re-poured 5 or 6 times when the house was being built. It's gold.

Nov 13, 2008 12:55 PM | Link to this

Hey Dugan, we live pretty close. Trentwood. But you may want to think twice about your manic plan. They threatened the lady next door to them,when she was moving.

Nov 13, 2008 12:54 PM | Link to this

Hey Dugan, we live pretty close. Trentwood. But you may want to think twice about your manic plan. They threatened the lady next door to them,when she was moving. Her husband was trying to back a truck and trailer down her drive and accidentally touched the grand drive by an inch. The funeral home "director" made a point of comming out and threatening them with a lawsuit for "damaging" the driveway. Ewwww! But little did he know...the women who was moving's husband is quite a known attorney himself; and found the threat entertaining.

By Dugan

Nov 12, 2008 5:02 PM | Link to this

Atlbelle:

Do you live on Aragon Way? I want to turn around in their driveway.

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