December 2017 — From January 2015 to January 2016, construction costs in Atlanta increased by 3.8 percent, which is higher than the national average of 1 percent. Meanwhile, Metro Atlanta has an all-time low vacancy rate of 7.2 percent. While demand for real estate in Atlanta is increasing due to the influx of young entrepreneurs, the labor pool for construction companies is continuously shrinking. In fact, a 2017 Georgia Construction Outlook Survey reported that 87 percent of companies surveyed said that recruiting and training qualified individuals was their biggest business challenge. Another report produced by CBRE shows that the number of construction workers shrunk by 20 percent as of 2016. Inevitably as demand increases, so does rent. And a decreasing labor supply only spurs these increasing prices.
Nevertheless, the Atlanta real estate market is thriving. While prices continue to rise, demand has not yet been stifled.
Focus: Atlanta spoke with a number of business leaders in the real estate and construction industries of Atlanta to get their insights. Here is what they said:
Bob Mathews, President and CEO, Colliers International Atlanta
“One of the issues in construction today is availability of workers. Labor costs have driven up prices substantially. We are not going to see a lot of new product built unless we see a demand that is willing to pay the costs plus a return. Office rents have climbed to over $40 per square foot per year for new product in the Atlanta market.”
Alex Chambers, Regional Vice-President, KDC Real Estate Development
“Rising costs are a huge issue caused by the workforce being short of labor. A lot of areas have become more competitive, and it’s another reason that built-to-spec is becoming the norm. Because construction costs are driving the prices up, companies want to make quicker decisions and get more for their money.”
Jenni Bonura, Managing Partner, Harry Norman Realtors
“A lot of builders are finding that the cost of labor and land are significantly high. The Federal Reserve has said that Atlanta has some of the best prices in the nation as far as lots available and the price of those, but those are not in the Midtown, Buckhead or Alpharetta type of areas. The lenders are starting to loosen up, but it hasn’t happened enough to meet the demand that currently exists.”