ATLANTA-The local retail sector presents opportunities for investors, especially those from outside Georgia and, for that matter, the US. Continued declines in job and population growth, along with weak consumer sentiment, will likely mean minimal development of new centers plus the possibility of more distressed properties coming to market.

Once a beacon of the booming national economy, Atlanta is now expected to lag many of the nation’s major metropolitan markets in the expected recovery. Besides weak housing conditions and severe job losses, the local population grew at its slowest rate in the past 30 years, according to a research report by Marcus & Millichap.

“Only a handful of shopping centers sold last year, but many out-of-state investors began circling the market for deals,” says John Leonard, vice president and regional manager with Marcus & Millichap in Atlanta. “With attractive bank-owned listings already generating multiple offers, activity should rise in 2010 as banks sell more reclaimed properties.”

Real Capital Analytics recorded 20 retail deals in the Atlanta market throughout 2009, totaling $305 million. Investment activity focused on well-occupied strip centers trading for less than $10 million, with institutional and foreign buyers comprising 44% of all activity, according to Cushman & Wakefield.

One recent example of foreign investor interest in local retail properties is the sale of Greenbriar Mall, which was reportedly on the brink of bankruptcy. Former owner Hendon Properties LLC has declined to disclose the buyer or the purchase price, believed to be well below the $26.4-million value listed in Fulton County property records for the 807,697-square-foot asset.

Atlanta’s retail sector posted nearly 5.5 million square feet of negative absorption last year, after sliding two million square feet in 2008, Cushman & Wakefield says. Suburban shopping centers were hit the hardest as reduced consumer spending led to store closings.

Reduced demand for space and further tightening of credit forced many proposed developments into pushing back openings to next year or later. Meanwhile, the recently completed Town Brookhaven mixed-use project, which signed key leases with Costco and Publix, still has half of its 600,000 square feet available.

“Though new development is unlikely in 2010, activity could rebound for select opportunities,” says Chris Shaner, senior research associate with Cushman & Wakefield in Atlanta. “Investment activity will be limited with distressed assets available to opportunistic investors.

Shaner adds that the local retail sector should benefit from pent-up demand as the recovery takes hold, even if Atlanta lags the nation. Solid long-term drivers remain for retail sales growth, including a highly educated labor force and a strong concentration of Fortune 500 companies, he says.

Marcus & Millichap forecasts that retail vacancy in the Atlanta market will reach 13% this year, while asking rents will slip 3.4% to $16 per square foot. Development will total only 1.4 million square feet, the lowest level of completions since 1992.

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