Small Strip Centers Continue to Attract Investors

Strip centers are generally defined as being under 100,000 sf. Neighborhood centers are usually in the 100,000-sf to 200,000-sf range. "Multi-tenant sales this year have inched up, compared to the same period in 2004, as investors are becoming more willing to give up the promise of low maintenance in exchange for higher returns," says John M. Leonard, regional manager of Marcus & Millichap's Atlanta division.

Total dollar volume of the multi-tenant transactions has risen 266% between 2001 and 2004. "Cost-conscious buyers are looking to the northern Marietta suburb for deals," Leonard notes. "Although the northern suburbs continue to garner considerable attention from investors, other areas are sparking interest as well," the broker says. Among them are Clayton, southern Rockdale and Henry counties.

"With less investor competition in the area, south metro can offer relatively affordable properties," Leonard says. For example, the Southlake Pavilion in Morrow sold earlier this year for $28.5 million or $109 per sf, while the Spivey Junction center in Stockbridge traded for $13.3 million or $163 per sf.

Developers are on track to deliver 3.6 million sf of new product this year, down from 3.8 million sf in 2004, according to the Marcus & Millichap report. The largest project nearing completion is the $2-billion, 1.1-million-sf Atlantic Station mixed-use campus on the site of the former Atlantic Steel Mill plant in Midtown. IKEA is the newest national retailer to enter the Atlanta scene at Atlantic Station.

Vacancy in the 100-million-sf retail market here is expected to drop by 20 basis points at year end to 8.7%. "Steady demand should continue to offset construction and keep vacancy from rising, as national and local retailers look for opportunities to increase their presence in the metro market," Leonard says.

The average asking rent is projected to increase 2.5% to $16.87 per sf by year end, while effective rents gain 2.7%. The average concession is forecast to fall to three weeks free rent by year end, according to the Marcus & Millichap report.