"It was overbuilt. No question," said Richard Poland, regional research manager for CoStar, a real estate data firm that produces the Atlanta Retail Market report.
"Every little suburb was over-retailed. Every little corner had a five-unit shopping center on it," said Poland. "And the economy caught up."
Agreed McMurrain: "There are a lot of strip centers that should never have been built, never should have been lent on, and don't have any anchors."
Jon Barry, president of Colliers Spectrum Cauble's retail brokerage, said Atlanta could be in a for "new phenomenon" as projects sit empty or unfinished for years.
"That's something we've never experienced in Atlanta," he said, "Looking at carcasses. We're used to seeing really rapid construction and completion."
McMurrain's Crossroads Village was built on speculation, meaning it wasn't pre-leased prior to construction. It's adjacent to an ALDI supermarket and two fast-food franchises, Burger King and El Pollo Loco.
McMurrain said four more restaurants are moving in: Pirate's Paradise Pub; Havana Sandwich Shop; Flamingos, a Mexican restaurant; and a Little Ceasars pizza franchise.
"Buford highway is an anomaly for Atlanta," McMurrain said, meaning the area and its strong ethnic mix supports such enterprises.
"Ethnic areas," he said, "are very entrepreneurial and are staying leased." He's hopeful the center will fill up by the end of 2009 as it adds small shops like nail salons.
His leasing agent, Amy Kennedy of The Shopping Center Group, said restaurants are easier deals to land right now. Four of her last five deals have been with eateries.
She cited two reasons: Restaurant equipment is being sold for as low as 20 cents on the dollar, and restaurant owners are putting up their own cash instead of seeking bank loans.
But not every area will be as fertile as Buford Highway.
In the suburbs, where land was cheaper, making for lower barriers to entry, vacant retail space could take years to fill, said Barry.
He returned last week from the International Council of Shopping Centers convention in Las Vegas, and he said the tables have definitely turned in favor of tenants.
"Last year at ICSC, landlords were asking us to lease space at extraordinarily high rents in fringe markets," said Barry. Last week "in Vegas, it was a question of what can you get me for this space. In one year, it's flipped from 'the sky's the limit' to a very sober reality."
Metro Atlanta submarkets with the highest retail vacancy rates in the first quarter of 2009 were Henry/Spalding at 18.2 percent; Cherokee/Woodstock at 17.2 percent; and Gwinnett Mall/Duluth at 13.6 percent. Areas with the lowest rates were Northlake/I-85 at 4.7 percent; Buckhead/Lenox at 5.8 percent and downtown Atlanta at 5.9 percent.
The vacancy rate is led by power centers, at 12.3 percent, and shopping centers, at 13 percent. The rate at malls is comparatively low, at 3.8 percent.
The region's overall vacancy rate was 4.7 percent in 2000. By mid-2007 it had risen to 7.4 percent, and from there it crept up to 8.9 percent in last year's fourth quarter.
The vacancy rate is led by power centers (12.3 percent) and shopping centers (13 percent). The rate at malls, on the other hand, is comparatively low, or less than 4 percent.
The first quarter of 2009 saw not only a sharp jump to 9.9 percent, but also marked the first time in nine years that the absorption rate went negative. In other words, said CoStar's Poland, more retailers vacated space than moved in.
The market failed to absorb more than 1.1 million square feet in the quarter.
"That's staggering," said Poland. "It's a huge change. A sharp redirection in the market."
In the meantime, 29 buildings with nearly 1.7 million square feet were completed by developers. And another nearly 1.5 million square feet of retail space is under construction.
"We're still looking at projects conceived, financed, and contracted to build prior to all this mess," said Barry, adding he can't think of any projects started in the past year or so.
One effect of the vacancy rate rise will be falling lease rates. On average, rents in Atlanta rose from $12.31 per square foot in 2000 to $15.96 in 2008, the CoStar report says. Rents declined to $15.59 per square foot in the first quarter of 2009.
Barry said rents at hard-hit power centers may have fallen as much as 50 percent in certain locations. Owners who would have held out for $20 a square foot in better times would be happy to "back fill" for $10 a square foot, he said.
On the bright side, lower rental rates may attract chains still in growth mode, such as AJWright, AutoZone, Dollar Tree Forever 21, hhgregg and Pinkberry Frozen Yogurt.
What will become of the vacant retail space and new projects coming into a beaten-down market?
Prolific retail developer Sembler recently sought help from DeKalb County taxpayers to finish Town Brookhaven, which was proposed as a 600,000-square-foot retail center north of Buckhead.
He said without the tax help, his project could be stalled indefinitely. Or until it's bought on the cheap by another developer who might finish it.
But for most space, said Barry, the answer depends on whether institutional investors, like real estate investment trusts, own the land, or whether under-capitalized entrepreneurs own the land.
The former, said Barry, probably have enough capital to get through the lean years. "They should be able to withstand a loss of rent to a point," he said. Of the latter, he added, "They have very little flexibility on reducing their rent/cash flow; otherwise they're under water on their mortgage."
He noted that Atlanta in the 1990s had a lot of empty Wal-Marts, Kmarts and Winn Dixies.
"We've been here before," said Barry. "It does gradually work itself out."