What pain might develop won’t be like anything the world experienced in the Great Recession, he said, as banks are stronger and central banks are poised to react if the economy starts to get feeble.
“I don’t see any obvious threats of recession,” he said.
His message to investors: “Don’t play scared. The odds are good the expansion will continue and the odds are good the next recession won’t be so nasty,” he said.
Atlanta was a poster-child for overdevelopment of speculative or build-it-and-they’ll-come office buildings in the run up to the Great Recession. Buckhead had several large office towers open as the economy went into deep freeze, forcing landlords to cut rents to fill them up.
That put pressure on owners — some of whom lost buildings to foreclosure — while tenants got the benefit of cheaper rents.
The metro area has more disciplined in this cycle as most offices under construction have been built for owners or tenants in hand. Job growth in the metro Atlanta area also has been strong.
Meanwhile, metro Atlanta ranked No. 4 behind Houston, Dallas and Phoenix in net migration from 2014 to 2016, and Thorpe said the Atlanta area should climb to No. 3 behind Miami and Dallas for net new residents through 2019.
A new rendering of Coda, the second phase of Georgia Tech’s Technology Square development in Midtown. The tower, a joint venture with Portman Holdings, is currently under construction and expected to open in 2019. Source: Portman
Generally, the U.S. isn’t over building. Beijing, Thorpe said, is currently building more office space than all gateway U.S. cities combined.
The metro Atlanta office vacancy rate stood at 16 percent in the first quarter of this year, according to Cushman & Wakefield, up from 15.8 percent at the end of 2016, but below the 16.2 percent rate in the first quarter of 2016.
About half a million square feet of speculative office space was completed in 2016, while the Three Alliance Center tower in Buckhead opened this year. Coda, at Technology Square, is the largest speculative project underway.
About 4 million square feet of speculative space — the equivalent of about three of Atlanta’s Bank of America Plaza towers — was under way in metro Atlanta at the end of 2016, according to Cushman & Wakefield.
The relatively tightness of Atlanta’s office market has led to record asking rents across the metro area.
A rendering of the planned Atlantic Yards office development in Atlantic Station. SPECIAL
Labor shortages, productivity gains and companies using fewer square feet per worker are some of the reasons behind the softness in expected office space demand.
Thorpe said the economic recovery still has room to run and markets have responded favorably to the incoming Trump Administration.
“When you boil it all down Trump is looking to cut taxes, increase spending in certain areas, [enact] some regulatory reform and challenge some trade agreements,” Thorpe said.
Though the president hasn’t made much progress in enacting that agenda so far, Thorpe said he expects the Trump Administration to get some of policy in place and that could help stimulate growth in the near term.
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