Houston Strategies

Twin Cities: Houston and Atlanta

The Wall Street Journal had this short profile of Atlanta last week, and from what I can tell, just about everything in it matches very closely with what's going on in Houston. It even has a couple Houston-specific stats of interest.

Downtown Atlanta Hopes For Change of Pace

Atlanta's sprawling metro area is seeing a surge of housing development in urban neighborhoods, and residents, who have suffered with the nation's highest commuting costs, are lining up for these new apartment and condominium units.

Developers are moving forward with thousands of units in established neighborhoods, such as Buckhead, and some new ones. Sandwiched between Buckhead and the central business district, Midtown is undergoing a renaissance with the redevelopment of the 138-acre site of an old steel mill. Developed by Atlanta's Jacoby Development Inc. and New York-based AIG Global Real Estate Investment Corp., the $2 billion Atlantic Station is adding 7.5 million square feet of retail, office and entertainment space, with hotels and as many as 5,000 residential units.

"People want to get off the highways," says Joel Brockmann, development director at Lane Co., which is building more than 500 apartments and nearly 1,000 condos at Atlantic Station.

More entertainment and shopping are coming to the city. Downtown Atlanta will soon boast a new aquarium, along with the new World of Coca-Cola museum. Developer Sembler Co., based in St. Petersburg, Fla., will wrap up four urban mixed-use developments by 2006 with a total of 1.6 million square feet of storefront space and 1,200 residential units. And office buildings are going up throughout the urban core, despite a lofty 22.4% vacancy rate in 2004.

Real-estate markets in the nation's ninth-largest metro area have been slow to recover, as job growth notched up a scant 0.8% year-over-year in March. However, a relatively low cost of living is attracting corporations to the city. One example is rolled-aluminum manufacturer Novelis Inc., which was spun off from Alcan Inc. this year and chose the city for its executive offices. According to Property & Portfolio Research, the Atlanta metro boasts four of the nation's 10 fastest-growing counties.

That may explain commutes that average 60 miles a day and cost a chart-topping $4,573 per year for a family with two workers driving separate cars, according to Sperling's BestPlaces. Despite a public transit system with a subway system, rush-hour traffic is heavy. Springtime marks the start of the "smog season" in Atlanta. With few constraints to new development, the Horizon City and its suburbs now extend over 8,376 square miles -- giving it the third-largest land area of any metro in the country, after Dallas and Houston.

Atlantic Station is preparing for a grand opening in late October. Once complete, the redevelopment is to include 12 million square feet of shops, restaurants, hotels, urban dwellings and office space plus 11 acres of public parks.

Atlanta's sprawl has made building easy, so it's not surprising that apartment vacancies stood at 11.5% at the end of 2004, the third highest in the U.S., trailing Houston and Denver. But vacancies near the city center were lower -- 9.8% in Midtown and 9.7% in Buckhead. In the next two years, at least 28% of new apartments will be built in urban markets.

Demographics are in the city's favor. Population growth is expected to outpace the nation in the next five years, and the area has more than its share of young adults, who are likely to rent apartments, even with a median housing price of just $155,562.

Real-estate executives say apartment vacancy rates are expected to drop quickly and there is evidence that the market is starting to tighten. "Concessions are starting to burn off. We're seeing an increase in effective rents," said John M. Leonard, a vice president and regional manager of Marcus & Millichap Real Estate Investment Brokerage Co.

Despite all the activity downtown, the pace of new construction has slowed in all property types. But developers here are known for their zeal, and once again they are pursuing permits. In the retail market, for example, the three million square feet delivered this year will mark a 13-year low, according to PPR. However, the amount of space in the planning and bidding stages would boost the area's inventory by 16%, giving Atlanta the most ambitious retail development program of any market in the U.S.

Did a lot of that sound familiar?

Their "3rd largest land area" claim doesn't match what I found in a Google search:

LAND AREA
(New Census MSA Boundaries)
In square miles, 2003

1. Phoenix - 14,573
2. Salt Lake City - 9,539
3. Dallas - 8,990
4. Houston - 8,928
5. St. Louis - 8,649
6. Denver - 8,385
7. Atlanta - 8,376
8. Kansas City - 7,858
9. San Antonio - 7,341
10. Chicago - 7,212
11. New York - 6,726

Also came across these cool maps (pages 3 and 4) of urban land areas as defined by the Census Bureau. Not sure what's up with those gigantic Phoenix and Salt Lake City MSA definitions, which each look large enough to cover downtown Houston and Austin in one metro if they were overlayed on Texas. I think it has to do with the very large county sizes in the west, and MSAs are defined by counties - so if even a small sliver of a metro area overflows into a large mostly-empty county, that county gets included in the MSA.

posted by Tory Gattis @ 10:43 PM