ATLANTA — After years of steady new construction for megamalls, retail developers in Atlanta are pausing to catch their breath. City shoppers, accustomed to welcoming new megamalls on a regular basis, will have to wait until fall 2003 for the arrival of a new shopping destination with more than 1 million sq. ft.
"With the economy in question and the other factors challenging retail, it's obvious to everyone that things are slowing down for development," says Sarah Huie of Huie Designs, an Atlanta-based environmental design firm that works on retail projects throughout the country.
As it stands, no fewer than 55 centers of 250,000 sq. ft. or more serve the metro area, according to the ICSC. The National Research Bureau counts 107.9 million GLA offered by centers with three or more stores and ranks the metro area ninth in the country in GLA per capita.
"I think what you're seeing is that Atlanta is showing some maturation," says Tom Porter, president of Atlanta-based architectural firm Thompson, Ventulett, Stainback and Associates. "The market had growth that was so explosive so long. Now, developers have planted the seeds and they're watching their gardens grow."
Among the gardens are Discover Mills and the Mall at Stonecrest, two new megamalls serving Atlanta's outlying suburbs.
Discover Mills, opened in November 2001 with 1.2 million sq. ft. and more than 200 stores. With a mix of outlets, entertainment and full-price retailers, the $250 million mall includes outlet stores for Saks Fifth Avenue and Neiman Marcus. The mall also has an ESPN X Games Skatepark and an acoustical performance venue.
Shortly after the holiday shopping season ended, Mark Rivers, executive vice president for Arlington, Va.-based Mills Corp., which developed the mall along the Interstate 85 corridor, 30 miles northeast of downtown Atlanta in Lithonia, gave the mall a "so far, so very good" progress report. "We had a solid holiday season. We've seen some strong sales despite some softness in the economy."
"We're fortunate for several reasons," Rivers says. "First, Gwinnett County is such a great market hub. The area is among the fastest growing and most vibrant counties in the southeast. Second, on the weekend, we're seeing some regional shopping tourists who come from the Carolinas and Tennessee. And then there's the greater Atlanta area that we're serving within a 50-mile radius."
Although Mills Corp. has no immediate plans to expand Discover Mills or acquire additional property, Rivers says the company is exploring other retail opportunities in Atlanta. "In the short term, I think we'll be adding to the overall mix with new tenants who have something different to offer."
"We like the market in Atlanta very much," Rivers says. "It's a vibrant, growing market and the geography continues to expand. We will see other periods of new development, but you may see the Atlanta market take a breath. Atlanta has great fundamentals: a good corporate presence, job growth and improving infrastructure. There are new highways being built and new residents, so I would expect to see developers making announcements in 2002 and 2003."
The Mall at Stonecrest
The Mall at Stonecrest, which opened in October, offers 1.3 million sq. ft. for about 130 tenants. The mall, which has a mix of enclosed and open air spaces, features Parisian, Rich's, JCPenney, Sears, and Dillard's.
Emerick J. Corsi, senior vice president of Cleveland, Ohio-based Forest City Enterprises which co-developed the mall with Fairview Cadillac within Dekalb County near Interstate 20 and 30 miles east of downtown Atlanta, reports strong results from the mall's first holiday season. "Our department stores exceeded their expectations and most of our major retailers beat their expectations. Some even reported the best sales in the region."
Corsi says Forest City Enterprises would be interested in adding properties in the Atlanta area with the right opportunity. "We'd like to have a lot more malls, but not a lot will be built. At this point, we're very selective. I'd say in the next 5 to 10 years, only two or three new malls will be built in Atlanta. In the meantime, some malls will fall away, some will be replaced and some will expand. Atlanta is a very attractive market for us. It's not an economy that is overly dependent on any one sector of the economy."
The city's fruitful relationship with suburban shopping malls began in 1971, when residents north of Atlanta welcomed The Rouse Co.’s Perimeter Mall — named for its convenient access from Interstate 285, which encircles the heart of the metropolitan area of Fulton, Dekalb, Cobb and Clayton Counties. The mall, now offering 1.4 million sq. ft., came to complement the development of several power centers and surrounding office space. Similarly, General Growth Properties’ North Point Mall opened in 1992 farther north within Fulton County in Alpharetta, and is surrounded by more than 12 million sq. ft. of office space.
Most recently, in 1999, Simon Property Group's Mall of Georgia opened in Buford, joining Simon's other five malls in the metro area: Lenox Square, Town Center at Cobb, Phipps Plaza, Northlake Mall and Gwinnett Place.
The next megamall on the horizon is Atlantic Station, which will be located within Midtown Atlanta at the site of a reclaimed steel plant. The mixed-use development is scheduled to open in fall 2003 with 1.5 million sq. ft. for retail, restaurants and movie theaters. Also planned are three hotels with a total of 1,000 rooms, at least 3,000 residential units, 1 million sq. ft. for high-tech office space and another 6 million sq. ft. of office space. The 140-acre development is near the intersection of Interstates 75 and 85 and is nestled between downtown Atlanta to the south and Buckhead to the north.
Mike Neal, managing partner for the Dallas-based Staubach Co.'s Southeast division in Atlanta, says the retail market in Atlanta is still strong in part because Atlanta residents have a generous amount of disposable income. Atlanta's metro area is expected to add another 1 million people before the end of the decade. However, unemployment reached 3.9% in November, which is high for the end of the year. Atlanta-based companies BellSouth, Delta, and Turner Broadcasting (CNN) announced major layoffs during 2001.
"Vacancy rates are low and pricing is relatively reasonable, but we are approaching the boundaries for growth," says Neal, who represents Target and other tenants in transactions throughout Atlanta and the region. Some major retailers, such as Office Depot and Toys R Us, are seeking to consolidate their presence by reducing the number of stores, he says.
"We are close to saturation in certain areas. There are still some pockets around Atlanta for successful development — on the south side and north of Atlanta" says Porter, whose firm works with Simon Property Group, Forest City Enterprises, General Growth Properties and other mall developers. "I think there will be more development, I just don't know when. Aside from these pockets, large regional centers are not going to happen in the next five years."
"I would say developers are a lot more cautious now," Porter says. "Unless the demographics are there and everything else is lined up perfectly, the projects just aren't going to move forward."
Neal predicts that much of the development in the next two years will concentrate on development and redevelopment of sites within the heart of the metro area, rather than outlying suburbs, which have seen most of the major retail development in recent years. "We've gone to the edges on new construction," he says. "When you look at Chicago or other cities, you can see that the density of retail space in Atlanta is low."
According to surveys by the real estate economic research company Reis, retail centers in metro Atlanta has seen an average vacancy rates below 8% since 1995. Now, vacancy rates are estimated at 8.5% for 2001. Meanwhile, rental costs have increased just 2.6% in the past year.
These vacancy rates suggest that Atlanta isn't oversaturated quite yet. An important test to the market will come in the months ahead, as consumers show whether they're willing to spend. If Atlanta consumers show more confidence, developers will be ready to accelerate their plans. If consumer confidence sags, developers will hasten to rethink their construction and expansion plans. "Consumers can turn on a dime," says Corsi.
John Davis is an Atlanta-based writer.