by Stephen Ursery
Much of the Atlanta commercial real estate community gathered at the Grand Hyatt in Buckhead on Tuesday morning for coffee, networking and a look ahead to next year. The occasion was Bisnow’s “2013 Atlanta Real Estate and Economic Forecast,” and The Wilbert Group team was there to see what two renowned economists and a five-member panel discussion had to say about the state of the economy and the commercial real estate industry.
Panelists at the “2013 Atlanta Real Estate and Economic Forecast.” From left to right: Mark Toro, partner at North American Properties; John Heagy, senior managing director at Hines; Jatin Desai, chief investment officer at Peachtree Hotel Group; Gordon Buchmiller, managing partner of Childress Klein Properties’ Atlanta office; and moderator Wes Hudson, commercial real estate leader of CohnReznick’s South Central Region.
In the spirit of the High Five blog, below are five notable points made during Tuesday’s event:
#1 Don’t Get Too Excited about the Economy Just Yet. Rajeev Dhawan, the director of Georgia State University’s Economic Forecasting Center and one of two keynote speakers on Tuesday, predicted that the U.S. economy wouldn’t take a dramatic leap forward in 2013, in part because many international markets will continue to struggle, which will in turn limit U.S. exports.
However, “2014 will be glorious,” he predicted. “If somehow we could get rid of 2013, I would and go straight to 2014.”
Dhawan did predict that ongoing fiscal-cliff negotiations would eventually produce “a credible down payment on [the federal] deficit.”
Mark Vitner, a senior economist with Wells Fargo Securities and the day’s second keynote speaker, largely echoed Dhawan’s sentiments. 2013 “will be challenging at the start of the year” as consumers and businesses adjust to higher taxes and federal spending cuts, but the economy should pick up steam in the latter half of the year, Vitner said.
“When you look at the economy, there’s not a lot of strength,” Vitner added. “Things aren’t great but they are better than they were a year ago in more areas of the economy. The strengths seem to be broadening.”
#2 Atlanta Must Expand Mass Transit. Several participants of Tuesday’s panel discussion made a point of repeatedly emphasizing the need for metro Atlanta to more heartily embrace mass transit and mitigate its traffic woes.
Referring to this summer’s defeat of the TSPLOST measure, which would have funded more mass transit and other traffic improvements, John Heagy, a senior managing director at Hines, said, “Secondary and tertiary markets [across the nation] that we compete with [for businesses] are using [the defeat] against us in a very big way … We’ve got to get to the Plan B that [TSPLOST] proponents said didn’t exist.”
#3 A New Day Has Dawned. The heyday of walk-up, garden-style apartment complexes and of ground-up retail centers in the suburbs has passed, said Mark Toro, a partner with North American Properties. The rise of Millennials, who prefer living and working in walkable, urban centers, means that future apartment and retail development will be concentrated in such areas, he noted.
The commercial real estate business “as we’ve known it is over for our careers,” Toro said, adding that one of the first things his firm does when considering a property for development is to enter the address at Walkscore.com to get the property’s walkability rating.
#4 The Office Market Remains Quiet. Furthermore, it could be awhile before it takes off, according to Gordon Buchmiller, a managing partner in Childress Klein Properties’ Atlanta office. “We don’t really see any office markets in the Southeast that we think are healthy,” he said, later adding, “We’re so far from rents that we would need to justify new construction.”
#5 Distressed Hotel Sales Seem to Be Declining. Jatin Desai, chief investment officer for Peachtree Hotel Group, said his firm’s purchases of troubled hotels are slowing. “2012 was probably a little lighter than 2011,” he said.
“We saw banks give borrowers a little more time,” Desai added. “Banks are becoming healthier … [they] can hold [a troubled hotel] on their books a little longer.”