December 21, 2012

Four on Friday: Bisnow’s 2013 Atlanta Real Estate and Economic Forecast

Bisnow edit

(Above, 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.)

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 several
Hartman Simons attorneys were 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.

In the spirit of the Four
on Friday series, below are four notable points made during Tuesday’s event: 

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

A New Day Has
. 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 to get the property’s walkability rating.

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.”

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.”

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