Current Economic Cycle
Redefines Real Opportunities for Investment in Atlanta

Like every dark cloud, the US economy and the Atlanta real estate market have their silver linings. For real estate investors coming into the Atlanta market possibly through 2011, they’ll have the opportunity to find good values and take advantage of more in-town development as more Atlantans choose to live, work and play more in one place.

That was the snapshot presented by three speakers who addressed How Atlanta’s Real Estate Development is Responding to the Economy, sponsored by the Commerce Club in Atlanta in August 2008.

David Haddow, president, Haddow & Company, a real estate consulting firm, said that the Atlanta market is going through an overdue correction after a long build-up, which included a healthy eight-year run for the condominium market from 1997 to 2005. As a result, there is a large supply, and when the economy in Atlanta, the Southeast and the United States turns around, there will be a demand for the some 7,000 newly constructed units that remain unsold.

The strategic key, according to H. Jerome Russell, president, H.J. Russell & Company and Russell New Urban Development, will be to find value-added opportunities for when the economy turns around and to be better positioned for the next downturn by finding ventures with reoccurring income, such as leasing and asset management.

“We’re trying to find the next place,” he said, “something that’s 40 to 50 cents on the dollar and about a year out.”

He sees the best possible opportunities inside I-285, the beltway that encircles the city and its close-in suburbs.

“Gas (gasoline prices) is pushing more people inside the beltway, and environmental issues are pushing more people inside the beltway,” he said. “It’s where they want to be. The exurbs are a concern.”

Russell said that various modes of transportation will be needed to serve in-town real estate development, and then innovation will come into play.

“People still want to move here,” he said, “but it will take two or three years to see the light.”

Those feelings were echoed and expanded on by Larry Gellerstedt III, executive vice president and chief development officer, Cousins Properties Inc.

“Being green and sustainable will be a ‘must,’” he said. “Firms are renting green properties, and it’s a nationwide policy for many. It’s a way of life, and it’s non-negotiable. Four-dollar-a-gallon gas is having a huge impact on how we live, work and play.”

Gellerstedt said the Atlanta community needs to navigate the current problems by looking at opportunities and risk management and reinvesting in its core, which is what made this is busy, vibrant community. The easy debt and mortgages that contributed to the large inventories of condos are painful to go through, and he noted that were some developments that never should have been started. However, he believes the housing will be absorbed when the economy corrects itself, and there will be growth.

“Atlanta and the Sunbelt are still a good place to be,” he said. “What will make it happen? Transportation – and we must hold politicians accountable and make the region a priority. We need to have the right leadership and the right tools to carry out the policies. Water is also critical and so is education. We need to reinvest for long-term benefits, such as with the Belt Line. We will work out of this cycle, and we can change what caused the problems.”

All three panelists emphasized that the Atlanta market will recover when the economy picks up, and that will happen in time – as it does with every cycle. For real estate investors, it’s a matter of determining the best time and place to catch the wave and ride it when the dark clouds blow away.

Atlanta ROI*