Atlanta Galleria Now

Tenant Q&A: Sam Latone of The Shopping Center Group

Sam Latone is co-CEO of The Shopping Center Group, a leading retail real estate service company and an Atlanta Galleria tenant. In this Q&A, we get to know more about his firm, and we get Latone’s insight on what kinds of retail properties are succeeding today, the pace of retail sales … and what makes for total relaxation.

Many thanks to Sam for his time.

AG: Give us a quick overview of The Shopping Center Group. Who are your clients and what services do you offer them?

Latone: Our clients include investors in retail properties as well as retailers and restaurant operators. For investors, we provide a comprehensive array of services, including leasing, property management, investment sales, construction supervision, development consulting and acquisition advisory.

We help tenants identify and lease the space that’s right for them, and we guide them through the disposition of excess property, an often-overlooked element of a retailer’s expansion and repositioning program.

Our landlord clients include the nation’s leading pension funds, insurance companies, public and private REITs and financial institutions. The retailers and restaurateurs we represent include virtually every category of retail and price point of the restaurant community.

AG: Which kinds of retail properties are poised to succeed in today's environment, and which kinds of assets are likely to struggle?

Latone: Core and core-plus properties (Class A properties that have a solid merchandising mix and are in markets with strong demographics) continue to do well. Generally, these assets are experiencing high levels of occupancy and, in many markets, very meaningful rent growth.

Conversely, Class C assets with no repositioning opportunity and/or those that are located in submarkets with weak demographic characteristics (in particular, a lack of population density) have struggled and will continue to struggle. In fact, these assets make up the lion’s share of vacancy in most markets.

In many cases, these projects were ill conceived to begin with, and if they were built during the last run up in the market, they may have first-generation space that has never been leased and may not ever get leased. Ultimately, these assets will continue to deteriorate and will need to be taken out of the retail inventory.

AG: With nearly two months of 2014 in the books, what is your assessment about the pace of retail sales in the country – are they strong enough to indicate that the economy is gaining serious momentum?

Latone: Although, on average, retail sales growth was about 3.5 percent in 2013, the tail of the bell curve is significant. On the one hand, properties that are well located and well merchandised may see double-digit sales growth. On the other hand, the opposite is true for those properties that suffer from the lack of good demographics and lack appropriate co-tenancy; these assets are seeing negative sales trends on a year-over-year basis.

As far as retail expenditures, consumer sentiment continues to be positive. This positive sentiment is being driven by the combination of an improving jobs and housing market picture, stable fuel prices and a stock market that may see some correction in 2014 but is still trading at high levels. So, absent a shock to the economy or some unexpected global event, we would expect a solid year of total U.S retail sales growth.

As far as categories of retailers, similar to property types, there is a significant bifurcation: discount and luxury retailers are doing very well, while mid-priced retailers typically are struggling.

AG: On a lighter note, tell us what your idea of the perfect day away from the office is.

Latone: Sitting on the beach, under an umbrella, with a drink in one hand and a great book in the other.

AG: Finally, what is your favorite thing about having an office in the Atlanta Galleria?

Latone: The Childress Klein people were fantastic to work with when we moved into the 300 building in 2008 and have been fantastic to work with ever since. It goes to show what a difference a great management company can make to a tenant experience. Moreover, amenities like the Athletic Club, the Georgian Club, the hotel and the cafeteria options make it a wonderful environment to be a part of.

Cobb Energy Centre Hosts Luncheon with Former CNBC Chief Economist

As the economy continues to get untracked in 2012, the metro Atlanta region finds itself at something of a crossroads, former CNBC chief economist Marci Rossell told those attending the Commercial Real Estate Women of Atlanta’s January luncheon, held Thursday at the Cobb Energy Performing Arts Centre.

The region has been shielded from the impact of past recessions because of robust population growth, Rossell noted. However, the metro area’s population has increased by just 1 percent over the past three years, meaning the region has struggled to shake off the effects of the downturn that began four years ago.

Atlanta officials now face a sobering question, according to Rossell: “Do we become Charlotte or do we become Detroit?” The former, she explained, responded to the decline of its textile-manufacturing sector in the early 1990s by making itself an appealing location for the finance sector, while the latter has continued to pin its hopes on the automobile industry.

The recent streamlining of its building permit process, which officials hope will make the city a desired destination for business expansions and relocations, indicates Atlanta is willing to make the changes needed to grow its economy, she said. 

Rossell’s analysis of Atlanta was just one component of an hour-long talk that also touched on the broader U.S. economy and the commercial real estate sector. 2012 will be marked by continued improvement in unemployment numbers, Rossell predicted. “This time next year – you can hold me to this – we’ll be at 7.5 percent unemployment,” she said.

She also downplayed the risks posed by the economic troubles of Europe, saying the U.S financial sector has prepared for the potential breakup of the euro zone. What would create a real setback is an unexpected event, such as last year’s earthquake in Japan or the debt-ceiling crisis, she argued. “What bumps you away from the [recovery] cycle? The unexpected things,” Rossell said. “Is there anybody here that hasn’t heard that Greece is in trouble?”

The commercial real estate sector has experienced improved transaction volume and financing conditions during the past two years, but pricing has yet to climb; however, pricing is always “the last phase of a [recovery] cycle,” she said.

Meanwhile, residential home prices may not rebound to their pre-recession, 2006 levels until 2016, Rossell indicated. “It takes 10 years for [residential] real estate to reach its previous peak,” she said.

Founded in 1982, CREW Atlanta’s mission is to elevate women to positions of power and influence in commercial real estate by providing resources and business opportunities. CREW Atlanta is a member of a national CREW Network. Lucky for us, our neighbor Cobb Energy Centre hosts a number of CREW’s events, including its upcoming 30^th Anniversary Gala on April 26.

To learn more about CREW Atlanta, check out its website.

More information about events at Cobb Energy Performing Arts Centre can be found at www.cobbenergycentre.com.

Cobb economy in 2012 will look awfully familiar, local economist says

When it comes to the Cobb County and metro Atlanta economies, next year is poised to look a lot like this year. That’s the forecast of Don Sabbarese, an economist who teaches at Kennesaw State University and is the director of the school’s Econometric Center. 

“What we saw in 2011 is what we’ll see in 2012: slow growth,” he said.

According to the most recent statistics available on the Georgia Department of Labor’s website, Cobb County had an unemployment rate of 9.1 percent in October 2011. The county’s rate declined from 9.4 percent in September and 9.6 percent in October 2010.

Cobb is performing better than some other jurisdictions in the state. For example, the unemployment rate for the 10-county area served by the Atlanta Regional Commission - which includes Cobb – had a 9.8 percent unemployment rate. The rates for the state of Georgia and the United States were 10.2 percent and 9 percent, respectively.

Cobb County and the metro Atlanta area have experienced some job growth recently in the education and health service sectors, as well as the manufacturing, professional business services and hospitality segments, Sabbarese noted. In fact, the Georgia Purchasing Managers Index (PMI), a measure of the state’s manufacturing activity that is calculated by the Econometric Center, reached 52.4 percent in November, its first increase in three months. A number above 50 indicates that manufacturing activity is increasing, while a number below 50 indicates it is decreasing.

It’s All About Real Estate

Sabbarese notes that the construction sector continues to lack job growth and says that until the real estate market improves and construction starts pick back up, the economies in Cobb and the rest of Georgia won’t return to their pre-recession job levels.

And while the job loss in the government sector may slow, local governments will continue to be burdened by the housing crisis, as depressed housing prices will keep tax revenues down.

The “construction and financial [sectors] are going to struggle,” he said. “It’s going to take a long time to improve.”