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COVID-19 Impact on Atlanta's Commercial Real Estate Sectors

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The Colliers | Atlanta Research team breaks down the effects to Atlanta's commercial real estate sectors to help you understand the impact of COVID-19 specific to Atlanta.

COVID-19 continues to impact markets across borders, multiple real estate sectors and people in our communities. While there are many resources including Colliers’ own repository of Coronavirus (COVID-19) resources here, it can be difficult to find specific information about how this affects our specific commercial real estate market here in Atlanta, Georgia. The Colliers | Atlanta research team has provided insights to help you understand the potential impact on your Atlanta business and community for the following Atlanta Commercial Real Estate sectors:

Office

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Key Takeaways:

  • New leasing activity will be put on hold
  • Office sectors most affected will begin to see job losses
  • Coworking’s pre-existing weaknesses could be exacerbated during the outbreak
  • The CDC’s location in Atlanta could attract more biotech and healthcare companies to the area
  • Tech will continue to thrive
  • Companies will become more space-minded in their office requirements

New leasing activity will be put on hold for the short-term as uncertainty takes command of the market. This will affect absorption levels in the back half of 2020, and into 2021.

Office sectors most affected by the COVID-19 pandemic, specifically those associated with hard-hit industries such as leisure and hospitality, airline and retail, will begin to see job losses, and thus result in some companies closing their offices and giving back space.

In addition, the coworking model has shown weaknesses already and could suffer from this outbreak.

Atlanta being the location for the CDC and reputable research institutions will attract more biotech and healthcare companies as they work closely with the government to study and provide research to diseases such as COVID-19, and others in order to get ahead of future situations like the current atmosphere. Proximity to the CDC could help speed up research and development of treatments targeted at future outbreaks and pandemics.

Tech will continue to thrive in Atlanta as tech companies look to expand their capabilities, most notably, 5g. Metro Atlanta’s location for available, and future, tech talent will continue to be the catalyst driving this demand. The current situation has highlighted the need for companies to be able to use virtual technology in order to keep their businesses running. Tech has also been known as an industry sector to quickly rebound after a negative economic event.

The business response to this pandemic will also thrust office-using companies to realize how important, and in some cases efficient, having employees working from home can be. This will lead to the continued trend of companies being more space-minded in their office requirements. 


Industrial

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Key Takeaways:

  • Industrial shows itself as the CRE sector keeping America running
  • Many industrial occupiers are showing their importance to “social distancing”
  • Panic buying could lead to expansion needs
  • Atlanta’s location makes it a desirable location for companies seeking quick and efficient movement of their supply chain
  • The value of ecommerce has increased exponentially
  • Last-mile locations are becoming even more important
  • Import/exports are expected to see hard times in the near future

It is hard to see sectors of Atlanta’s industrial market that could suffer based on the COVID-19 pandemic. During this time, industrial has shown itself as the commercial real estate sector keeping America running.

Food companies, logistics companies, warehousing and to some extent manufacturing have shown how important they are in times of “social distancing” and keeping the supply chain open.

The panic buying of consumer staples during uncertain times like these has put food manufacturers and suppliers in the position of making sure their network of distribution and warehousing facilities are adequate to handle these types of demand spikes on a regional basis. These companies will need to expand their industrial footprint in the metro area to keep up with the increased demand.

Atlanta’s location as a regional logistics hub makes it that much more of a desirable location for those companies seeking quick and efficient movement of their supply chain. Logistics companies will continue to see the need to optimize both locally and regionally.

With stores adjusting their hours and political leaders asking the public to stay home, the value of ecommerce has increased exponentially. Demand for large distribution and warehouse facilities will continue its incredible run over the past few years. And, last-mile locations have shown to become even more important to the industrial landscape.

The one component to industrial which will see hard times in the near term will be the import/export industry. The Georgia Ports Authority expects March container volumes to come in well below its normal amount due to the shutdown in the global supply chain as caused by the COVID-19 pandemic. On the flipside, the Authority is optimistic for a quick turnaround as bookings on the water have begun to increase and the Port of Savannah is beginning to see increased demand from importers, notably China which is seeing a return to normal production levels.


Retail

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Key Takeaways:

  • Retail will be one of the hardest hit sectors in Atlanta
  • All aspects of retail are adapting to the current situation
  • The dramatic drop in demand will result in some businesses shuttering for good – increasing vacancies across the metro area
  • The obligatory shift to ecommerce will accelerate brick-and-mortar closings
  • Large mall owners will feel an effect on their bottom line
  • Restaurants, bars, and entertainment establishments will see a dramatic bounce-back when the pandemic subsides

Retail will be one of the hardest hit sectors in Atlanta from the COVID-19 pandemic. All aspects of retail are adapting to the current situation, whether it be from changing store hours, providing drive-thru and take-out options or even having to close shop all together.

The dramatic drop in normal retail demand will result in the loss of valuable hourly and part-time employees and will eventually lead to some retail business shuttering for good. This will result in increased vacancies across the metro area. Additionally, the obligatory shift to ecommerce buying will accelerate the closings of brick-and-mortar locations.

While restaurants and bars are adapting and remaining open as to-go service options, malls will be hit hard as they have been forced to close in response to the COVID-19 pandemic. This will no doubt have an effect on the bottom-lines of large mall owners such as Simon Property Group here in Atlanta.

The longer the pandemic lasts, the more pronounced the damage to the Atlanta retail sector will be.

When the COVID-19 pandemic subsides and the tide begins to turn, expect retail to see a dramatic bounce-back at restaurants, bars, entertainment locations and other eating/drinking establishments as people look to escape their “cabin fever” and celebrate. This will help metro Atlanta’s retail scene, but the overall damage to the sector, and how long it will take to be fully recovered will take months to sort out.


Multifamily

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Key Takeaways:

  • Multifamily will also be hit hard by the COVID-19 pandemic
  • Job losses and temporary shut downs will result in many renters not making monthly payments
  • Housing affordability will become increasingly important
  • New construction could be delayed until full economic recovery
  • Recovery should be fairly quick in Atlanta

Multifamily will be another real estate sector in Atlanta hit hard by the COVID-19 pandemic. Apartments will face the challenge of renters not being able to make their monthly payments due to job losses or temporary shutdown of their current jobs.

Housing affordability will be of utmost importance now for those whose incomes have been affected. This could result in some apartment owners in Atlanta having to decrease rents in order to avoid upticks in vacancies of their properties. The value of lower-class product could increase, however, as the move towards affordability takes hold.

New construction activity could be affected as some Atlanta developers look to delay groundbreakings of announced projects until the economy has fully recovered from the COVID-19 pandemic.

Like retail, recovery in the multifamily sector should be fairly quick in Atlanta where overall fundamentals were strong prior to the outbreak.


Hospitality

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Key Takeaways:

  • Atlanta’s hospitality sector has been thrown into recession due to the outbreak
  • Atlanta hotel occupancy is expected to drop between 70-80% over the next couple months
  • Atlanta has been one of the hardest hit due to many events having been canceled or postponed
  • Major hotel chains have seen values plummet over the past month
  • Atlanta has always been quick to bounce back, and anticipation for an expedited turnaround is expected.

Much like the rest of the nation, the hospitality sector in Atlanta has no doubt been thrown into recession due to the COVID-19 outbreak. The Atlanta Convention and Visitors Bureau is expecting hotel occupancy rates to drop between 70-80% over the next couple months.

Atlanta has been one of the hardest hit by the pandemic, losing the NCAA Final Four Tournament and everything leading up to the popular sporting event; seeing the postponement of popular events such as the Folds of Honor QuikTrip 500 NASCAR race at Atlanta Motor Speedway and the Shaky Knees Festival held every March; having major sports teams delaying the opening of their seasons; and also the cancellations and or postponements of close to 100 conventions, conferences and events that were to take place over the next few months.

Overall, the major hotel chains have seen their values plummet over the past month. This will affect future projects planned in the metro area.

The timing of the recovery of the hospitality sector is still undetermined due to the fluidity of the COVID-19 pandemic. Atlanta has always been a city to bounce back quickly from these types of shocks. Given its stature as one of the major southeastern tourist destinations, the anticipation is for an expedited turnaround of the city’s hotel industry once all is back to normal, hopefully.

 


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Scott Amoson

Director - Research

Atlanta

Scott is the Director of Research for Colliers International in Atlanta, Georgia.  In his role, Scott supports all of the company's brokers in the Atlanta office.  He also manages the Research Associate in the company, and mentors an intern annually during the summer.

Scott began his real estate career in 2000 as a research assistant with Richard Bowers & Co., a local brokerage firm.  He joined Colliers International in Atlanta in 2003.  Scott specializes in aiding the company's clients with geographical, informational and analytical research.  With his extensive knowledge, he provides customized research data including:  market trends, lease and sales comparables, plats/ownership information, demographics, prospect information and economic information.  In addition to supporting the company's brokers and staff, his other responsibilities include compiling and writing quarterly market and submarket newsletters, maintaining the company's internal database of over 10,000 sales and lease transactions, and tracking news/trends related to Atlanta's commercial real estate market.  He is frequently called upon by local news sources for his knowledge and expertise of real estate matters in Atlanta.

As a member of the Colliers International Research Council, he advises on quarterly conference calls and provides valuable input on matters directing the research platform for Colliers International.  Scott was recently selected as the Research Ambassador for the Southeast Region as a part of Colliers International's Centers of Excellence platform.

Scott is a native of Atlanta, and enjoys spending time with his wife Lupe and daughter Sienna.  He is an avid golfer and loves vacationing with family.

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