MARIETTA — While industry insiders have been signaling the recovery of the residential housing market in certain pockets of Cobb County, most agree the commercial real estate market is improving, but not fast enough.
According to CoStar Group, Inc., the company that tracks commercial real estate data nationally, there is 38.6 million square feet of office space in Cobb County, with 16 percent currently vacant.
Connie Engel, partner at developer Childress Klein Properties, says at her company, the volume of new prospects is starting to increase. “We have had no new product in 11 years,” she said. “The inventory is starting to tighten, which is good.”
Engel also says at her company’s Cobb development, the 86-acre Atlanta Galleria Office Park, occupancy rates are above average at 89 percent. “We need for the economy to start producing new jobs,” she said. “The good news is that there is enough pent-up demand by existing business owners that we are seeing an uptick in velocity.” CoStar indicates in the Cumberland-Galleria office market as a whole, vacancy rates dropped from 17.2 percent at year end 2011, to 16.8 percent at the end of first quarter 2013.
Dan Buyers, partner at McWhirter Realty, a Smyrna-based commercial real estate company, said, “It seems that we are just treading water— it’s going in the right direction, but slowly.” According to Cumberland Community Improvement District Cumberland Chairman Tad Leithead, the Cumberland-Galleria submarket represents 5 percent of Georgia’s economy and 33 percent of Cobb’s economy. He also said that while the CID contains just 1.6 percent of Cobb’s land, it amounts to 16 percent of the county’s commercial tax digest.
Buyers concurs, “In my mind, Cumberland is our urban core for Cobb County, the way that Atlanta is for the region. Just like we all need a healthy Atlanta, Cobb needs a healthy Cumberland.”
“It’s important for people to recognize that it is the most accessible submarket by car in all of metro Atlanta,” he continued. “I worry to a degree that we miss out on some office relocations based on Perimeter having transit … It’s an area that Cumberland needs to be focused on.”
Buyers said improvements like the new bridge over Highway 41 and the extension of the Chattahoochee river trail underneath Interstate 285 are good ways for the Cumberland office market to distinguish itself through nature.
“We need to make Cumberland as attractive as we can for the creative class and continue to give them opportunities to eat out and have access to nature and linear parks,” he said. “It’s important to continue to create mixed-use environments … We want those recent college grads to live in Cumberland.”
CoStar largely includes Marietta, within the Cumberland-Galleria office submarket. Parkway Center, Marietta’s largest class-A office park off Franklin Road, which is experiencing high vacancy rates, is also included in this submarket.
Buyers’ says that Marietta Square’s two largest landlords report occupancy rates are currently very good. He also recently negotiated the sale of two buildings on Roswell Street and reports brisk leasing activity on Washington Avenue.
In the Town Center office corridor, vacancy rates dropped from 14.1 percent year-end 2011, to 12.9 percent at the end of first quarter 2013. In the last year, Home Depot opened its new call center on Chastain Meadows Parkway and aluminum giant Novelis opened its international research and development headquarters on Vaughn Road.
Led by WellStar’s growth, Buyers says the leasing activity around the now regional Kennestone Hospital has been extremely strong. With an aging baby boomer population — an increased need for medical services is good for real estate.
“If you look at real estate in general, some of the most exciting things that have occurred have been medical,” he said. “We want Kennestone Regional Medical Center to capture as much business as it can — it’s good for Cobb County.”
While not tracked individually, local insiders consider East Cobb its own commercial market. WellStar recently broke ground on its $74 million East Cobb Health Park that includes 250,000 sq. ft. of medical space situated on 23 acres between Roswell and Providence roads.
According to Buyers, additional leasing activity has been strong in both medical and restaurant space on the Johnson Ferry Road corridor.
In the retail segment, CoStar reports that of Cobb’s 46 million square feet, just 9 percent is currently vacant. CoStar and other companies divide Cobb into four submarkets: Cumberland-Galleria, Kennesaw-Northwest Cobb, Southwest Cobb and Marietta-Town Center.
Buyers says comparing vacancy rates from end of year 2011 to first quarter 2013, the improvements in the Cumberland-Galleria are the most dramatic, dropping from 9.4 to 6.9 percent.
“We are competing well against all of our peers in metro Atlanta, but none of us are doing as well as we would like. With double-digit vacancies, Cobb is not lagging in metro Atlanta; we are just lagging as to where we want to be.”
Buyers also noted that while Town Center is not tracked individually, with 11 million square feet it is Cobb’s second biggest sub-market and is steadily improving.
“Completion of the Big Shanty connector is doing wonders for traffic,” said Buyers. He also says the Skip Spann Connector, the future bridge over Interstate 75 that will connect Busbee Drive and Frey Road near Kennesaw State University, will allow drivers to skip traffic on Chastain Road, which is projected to have more than 40,000 cars traveling daily in each direction by 2014. “Cobb County’s goal for Town Center should be to have the same connectivity that Cumberland has,” Buyers said.
Cobb has 54.8 million square feet of industrial space with 4.9 million, or 9 percent, currently vacant.
Buyers says the industrial properties are largely located in southwest Cobb, Marietta, Kennesaw and Acworth.
Kennesaw-Acworth saw the greatest improvement in vacancies, dropping from 15.3 to 11.3 percent, but at $5.86 per square foot, Marietta currently has the highest rental rates. “That competes very strongly with Fulton Industrial and the airport,” said Buyers.
Experts agree that across all commercial real estate sectors, in order to see drastic improvements, significant job creation must occur first. Buyers concludes, “Cobb is no different than the rest of the nation, we just need jobs.”