Recovery of Atlanta's commercial real estate (CRE) sector is hampered by high unemployment, according to Federal Reserve Bank of Atlanta President and CEO Dennis P. Lockhart.
‘The Atlanta CRE market has been very slow to improve,’ said Lockhart in a May 11 speech before Atlanta's Council for Quality Growth. ‘Similar to national trends, apartment occupancy rates have risen but are still well below national levels. Weak job creation and employment growth are constraining demand for office space. Atlanta office vacancy rates remained above 20 percent in the first quarter, according to CB Richard Ellis.’
Lockhart blamed the city's problems in generating new jobs for CRE problems. ‘Overall, slow employment growth appears to be the primary factor limiting demand for commercial space,’ he continued. ‘But the weakness in the CRE market, in my view, does not present as much risk to the outlook as the single-family residential sector does.’
Lockhart added that he felt the economy was showing ‘clear evidence of improving quality’ and that employment is ‘now growing at a meaningful pace.’ However, he noted that challenges remain.
‘Can we have high-quality growth while the residential real estate and commercial real estate sectors continue to be so weak?’ he asked. ‘Not completely, in my opinion. The recovery will progress, but it will not be robust until we work through the economy's serious imbalances, including those in the real estate sector. As I look ahead, I think the most reasonable assumption is that improvement of the real estate sector will lag an otherwise improving economy. But I am encouraged by the fact that the economy is increasingly on firmer footing.’
