Boom or Bust? Southeast Seeing Some of Both

ATLANTA—Atlanta is one of the fastest-growing cities in the Southeast—and the nation. But all Southeast cities aren't as fortunate. Indeed, despite the overall recovery in the region there are still some cities that are posting significant struggles instead of significant recovery.

GlobeSt.com caught up with Michael B. Dodds, senior managing director at Integra Realty Resources, to get his insights on the booming and broken cities in the Southeast commercial real estate sector. If you missed part one of this exclusive interview, you can read it here: Auto Manufacturing Booming in These Cities.

GlobeSt.com: What specific Southeast cities are seeing the most interest and why?

Dodds: The 24-hour cities will always get their fair share of investor interest, especially from foreign buyers. But as pricing has risen, and cap rates have declined, some investors have been forced to take a look at secondary markets.

In the Emerging Trends in Real Estate, published by Urban Land Institute, it was reported that investment in US tertiary markets was up 72% from the previous year. I expect this to continue to rise.

IRR Viewpoint 2015, Integra Realty Resources' annual report, indicates that many southeastern cities are rebounding well in all property sectors. Charlotte, Miami, Louisville, and Nashville are the four southeastern cities reported to be in expansion mode in the retail, office, multifamily, and office sectors, and with the exception of Nashville, the lodging sector of these cities is also in expansion.

GlobeSt.com: What cities are still struggling and why?

Dodds: IRR Viewpoint 2015 shows that several southeastern cities are still struggling to recover from the recession. Greensboro, NC is listed as being in a recessionary phase in three of the four sectors. Birmingham, Jacksonville, and Jackson, MS are shown in the report as being in recovery mode in multiple sectors.

GlobeSt.com: Are you seeing any "negative" trends or major challenges in the Southeast?

Dodds: From an investment standpoint, the negative seems to be the lack of available product to buy. This is especially true in the net leased sector.

The buyers are there, the money is there, but the product is not. This has forced net leased cap rates to historic lows. Uncertainty regarding interest rates is a growing concern as well. These issues are nationwide, not just in the southeast.

GlobeSt.com: How do you expect commercial real estate climates in the Southeast market to change in the quarters ahead?

Dodds: There really isn't a reason to expect the interest in the southeast to change anytime soon. Area Development Magazine recently ranked the Top States for Doing Business in 2014. The top ten included Georgia, South Carolina, Alabama, Tennessee, Louisiana, North Carolina, and Mississippi. That's seven of the top 10.