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Atlanta, GA Overview Atlanta was struck particularly hard by the great recession, but it is finally making steady progress in the recovery. Construction across this metropolitan area was going strong when the downturn struck, paralyzing particularly the residential market. But the metro’s economy is resilient and quite diversified, and one that has become particularly popular with growing sectors such as entertainment, education and technology/biotechnology. Personal income growth is expected to move higher by 4 to 7.5% per year over the next four years. Any tax increase would obviously dampen consumer spending that might otherwise rise with that income. For its market size, Atlanta does have significant occupancy by the federal government (from military installations to the Centers for Disease Control and Prevention) though only 2.5% is within the privately held office market. Outlook There is no doubt that the fiscal cliff will damage gross metro product (GMP) and negatively impact this metro’s job growth in 2013 -- though not severely enough to push the Atlanta market into recession. Net absorption, which has been on the rise across the area, would likely move into negative territory. But commercial construction has been more or less in check since the recession. Absent any compromise on the fiscal cliff, the vacancy rate would rise to 20%, although that is within the historical average for a market which thrives on new product and continues to expand into the exurbs. Atlanta also benefits from its home state of Georgia which has its fiscal house in good order due to relatively strong (conservative) budgets along with growing state tax revenues.
Sequestration Cuts
LOW RISK
HIGH RISK
Tax Increases
LOW RISK
HIGH RISK
FISCAL POLICY IMPACT SCENARIOS 2013 Forecast Fiscal Cliff
SCENARIOS
Most Probable
(30% probability)
(70% probability)
1.6%
4.1%
-11,800
57,800
8.6%
8.2%
-497,000
2,851,000
Economic Gross Metro Product (GMP) Job Growth Unemployment Rate
Office Net Absorption (SF) Vacancy
19.0%
17.6%
Rents – Avg. Asking
$18.64
$18.86
Rents – Annual Growth
-0.2%
1.0%
Methodology explained on page 38
TAX EXPOSURE & INCOME Rank Total Households (mil.) % > $200k Income
1.9
#4
4.7%
#17
Source: Census Bureau, CPS Survey
FEDERAL GOVERNMENT STATISTICS Federal Employment
47,100
% of Total Workforce
2.0%
Government Private Occupied Space (SF)
4,907,000
% of Total Inventory
2.5%
Demand (avg.annual gross leasing from Gov’t, SF)
258,000
Source: GSA, BLS, Cassidy Turley Research
IMPACT OF FEDERAL PROCUREMENT SPENDING
TOTAL GMP = $272 BILLION
15% Federal Spending as % of GMP Rank #22 out of 30 markets
Non-Federal portion of GMP Total Federal Spending Federal Salaries, Grants, Insurance Procurement Contracts
$6.0
3.5%
$5.0
3.0% 2.5%
$4.0
2.0%
$3.0
1.5%
$2.0
$231.7
$40.6
$32.6
$8.0
1.0%
$1.0
0.5%
$0.0
0.0% Department of Defense
Non-Defense
Procurement Contracts ($ bil.) Source: Consolidated Federal Funds Report, 2010, $ Bil.
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Combined % of GMP Total - % of GMP
Source: Consolidated Federal Funds Report, 2010
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