Marketwatch April 10, 2020

REAL ESTATE 2.0

Thanks to Norton Associates Diane Brown, Stephen Reynolds, Wade Rhodes, Glenda Caldwell and Gina Johnson for their observations, which helped us pen this week’s MARKETWATCH.

Consider that the world is now more at rest than perhaps any other time since the Great Flood. There are less emissions from fossil fuels, less pollutants to our water sources and even our minds have slowed from the daily frenzy of pre-quarantine schedules. There are no stats yet, but possibly fewer crimes.  Of course, it could be that our news sources are  focused 24/7 on COVID-19.

The overarching observation for North Georgia after this pandemic is that the economic fundamentals of this region - healthcare, tourism, poultry, manufacturing and emerging warehouse/distribution centers - are solid and will recover and move forward after some short-term pains. This virus is fundamentally an urban, major metropolitan issue as it thrives in densely populated areas. Just look at our state for example, as of today, there are 10,885 cases reported and 7 of the 8 most contaminated counties are metro Atlanta. Only one that is not is Dougherty County due to one carrier moving through multiple large events. As of today, these 7 metro counties account for 40% of Coronavirus cases in the state. The more significant changes in CRE market long term will happen in these metro market areas.  

North Georgia’s market is really on the perimeter of the metro Atlanta market. As a result, it could be in a good position going forward long term to leverage its geographic position, "more space" proposition and the explosion of video communication to attract new companies from metro Atlanta. We are "far enough from the density and risk of Atlanta, yet close enough to get to what you need, airport, major venues, major events, etc.” Some data and thoughts. 

North Georgia Market Short Term (About 6 months)

• Independent retail, and restaurant (hi-touch) businesses in area may not be able to ride out virus and must close. The upside of this unfortunate situation is that the demand for good local retail and restaurants, revitalization of Main Street, more outdoor distance dining will return and there should be retail space available to lease, perhaps at better rates in 2021.
• Landlord/Tenant relationships, particularly in retail and multi-family, will be strained if “shelter in place” goes beyond May. No money for these business owners and no jobs for tenants will hurt everyone here.
• Weak North Georgia office markets, high vacancy rates except along the GA-400 corridor, will get worse. This is a trend that is just being accelerated by the Coronavirus.
• While we have had “sheltered in place” now for an extended period, many are already thinking future renovation, expansion, and possible moves to larger quarters. Watch for dual office areas, children’s study carrels, multi-generational space configurations and home gym workout areas, with high-speed and TV displays everywhere. Not so much feathering our nests, just reconfiguring and improving how we actually use our spaces and enjoy our retreats.
• Biggest short-term concern is what impact the coronavirus will have on important tourism sectors in North Georgia for summer and fall peak season. Social distancing practices and anxiety could affect visits to state parks, Lake Lanier and seasonal festivals. If virus restrictions are not gone by the end of May, then economic, jobs and business impact would be negative and hard.

North Georgia Market Long Term (2021 and Beyond)

• Acceleration of e-commerce shopping and needed improvements and diversification of company supply chains will make I-85 Atlanta to Greenville, SC warehouse/distribution even more important and valuable. Leasing and building warehouses along this critical I-85 corridor should be strong. Manufacturing and supply chain distribution across multiple countries and returning to the USA will accelerate over the next two years.
• Healthcare systems and governments (local, county and state) will need to have pandemic plans that will require having on site or nearby storage for required supplies to manage the next virus more thoroughly and effectively. We will all be better prepared as individuals, corporations and communities. Community leadership will also have to answer the question, "what large spaces could we use if the health system is overrun by the virus and we need to create a makeshift hospital?"  A new what if????  worst case scenario.
•  Riding in tubes has become a germaphobic nightmare; elevators, cruise ships, buses, trains, subways, planes could alter transportation patterns.
• The value of "safe land" outside of a metropolitan area when another virus comes. The farms and mountains of North Georgia would be great "sanctuaries" for the executives who live and work in Atlanta and need to get out and be safe in the next pandemic. Large land tracts with accessibility to great medical facilities could be one of this market’s winners.
• We will see lots of conversation on density, both pro and con. Forward, we think that mega multi-story residential and perhaps office will slow, and arm’s length free-standing residential products will see rental and purchase premiums.

As the market unfolds in the weeks to come, stay tuned to future NORTON MARKETWATCH publications. We are still in uncharted waters, but there are signs of calming ahead. We remain bullish on the future of real estate as an asset class, an investment vehicle and an avenue to put roofs over our heads.

STAY AT HOME AND BE SAFE

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