Session 5 - Creating Real Estate Market Feasibility Studies

CREATING REAL ESTATE MARKETFEASIBILITY STUDIES

NATI ONAL TREASURY C I T I ES ’ SUPPORT PROGRAMMETECHNICAL ASSI STANCE WORKSHOP

24-26 JULY 2017

SESSION GOALSUNDERSTANDING MARKET STUDIES

CASE STUDY: MURPHY CROSSINGSUMMARY



SESSION GOALS

¡ Demonstrate how city objectives are applied within its market demand context, and the costs and other impacts to achieve the objectives, addressing the following:

§ How can I translate my City’s objectives into a land development project?

§ To what extent market forces will support city objectives?

§ How do I identify development strategies to offset market forces?



UNDERSTANDING MARKET STUDIES

¡ Real estate market analysis is a specialized methodology in the real estate industry that intends to answer a critical question every stakeholder should ask before going to market:

¡ Real estate market analysis – and its product, a market study – is used by developers, investors, financiers, purchasers, and public and non-profit agencies/organizations to understand development feasibility.

Is a development project or investment likely to succeed in the marketplace?

UNDERSTANDING MARKET STUDIES

DetermineObjectives

• Goals of the land development project(mixed-use development, provide retail amenities, affordable housing)

Conduct Area andSite Analysis

• Define the market area for the project• Evaluate existing site conditions, adjacencies, access

Collect and Analyze Demographic, Economic Data

• Population data (age, growth, education, diversity)• Household incomes, income growth, unemployment• Job growth, unemployment rates

Conduct SupplyAnalysis

• Development pipeline• Market rents, sale prices

Conduct Demand Analysis

• Retail gap analysis• Rent, sale price growth• Occupancy, absorption rates

Conclusions, Findings, and Path Forward

• Supportable development by use• Scenario analysis



The Atlanta BeltLine is a sustainable redevelopment project

that is transforming the city.

It will ultimately connect 45 in-town neighborhoods via a 22-mile loop of multi-use trails, modern

streetcar, and parks – all based on railroad corridors that formerly encircled Atlanta. When completed, it

will provide first and last mile connectivity for regional transportation initiatives and put Atlanta on

a path to 21st century economic growth and sustainability.

OBJECTIVES

5,600 UnitsAffordable Housing

1,300 AcresParks

$10-20 BillionEconomic Development

30,000Permanent Jobs

48,000Construction Jobs

33 MilesMulti-Use Trails

22 MilesRail Transit

also… Sustainability, Historic Preservation, Public Art

1,100 AcresBrownfields Remediated

ATLANTA BELTLINE ECONOMIC DEVELOPMENT OBJECTIVES

OBJECTIVES

OBJECTIVES

AREA AND SITE ANALYSIS

• Buildings are brick, metal, or open air.• Various stages of disrepair and/or

usefulness

• Approximately 18 Acres (7.3 Hectares)• Contains 12 buildings – all industrial

Murphy Crossing – Site Overview




Interstate 20

Warner Street SWSy

lvan

Roa

d SW




Size: 2.1 million square feet

Current Use: Public food hall, retail, office, residential

Previous Use: Office building and retail store

Major Tenants: H&F Burger, Dancing Goats Coffee Bar, Ponce City Flats

Proximity to Public Transit: Beltline, North Avenue MARTA Station

Size: 9 acres

Amenities: Stadium, Retail, Restaurants

Current Use: Institutional, residential, retail, and office.

Previous Use: Stadium and surface parking

Major Tenants: The Luminary, Fred’s Meat and Bread, Urban Pl8

Proximity to Public Transit: Beltline

Ponce City Market Krog Street Market

ANALYSIS OF DEMOGRAPHIC DATA

Total Population

YearMurphy Crossing

Study AreaAtlanta, GA Atlanta Metro Area

2000 14,229 417,610 4,263,438

2010 11,940 420,003 5,286,728

2015 11,946 439,696 5,527,230

2020 12,279 463,318 5,852,718

11,946

23,12326,967

05,000

10,00015,00020,00025,00030,000

Murphy Crossing Krog Street Market Ponce City Market

Population, 2015


$20,734

$41,956

$55,692

$41,532

$56,889

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Murphy Crossing Krog Street Market

Ponce City Market

Atlanta Atlanta Metro Area

Median Household Income, 2015


43% 43%

12%

2%

24%

38%

22% 15% 13%

40% 32%

16%

0%

10%

20%

30%

40%

50%

<$15,000 $15,000-$50,000 $50,000-$100,000 $100,000+

Percentage of Residents by Level of Disposable Income

Murphy Crossing Atlanta City Atlanta Metro Area

$18,121

$34,316

$46,342

$0 $10,000 $20,000 $30,000 $40,000 $50,000

Murphy Crossing Atlanta City Atlanta Metro Area

Median Disposable Income


21%

53%

26%

10%

75%

15% 10%

74%

16% 16%

62%

21% 21%

57%

22%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

0-14 15-54 55+

Age Breakdown, 2015

Murphy Crossing Krog Street Market Ponce City Market Atlanta Atlanta Metro Area

ANALYSIS OF ECONOMIC DATA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Working Residents, 2002-2014

Murphy Crossing

Krog Street Market

Ponce City Market


0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Share of Working Residents Making >$40,000, 2002-2014

12.50%

28.20%

19.10%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Murphy Crossing Krog Street Market

Ponce City Market

Growth in Share of Working Residents Making >$40,000, 2002-2014


616 3

-17 -14 5 7 2 3

2006 2007 2008 2009 2010 2011 2012 2013 2014

Num

ber

of J

obs

Add

ed (

000s

)

Number of Jobs Annually in both Atlanta City and the Metro Area

Atlanta City Atlanta Metro Area

66

88

60

4236

-27

49

-21

-137


4.5

9.2

9.1-0.4

13.1

5.8

0.1-2.5

25.1

18

-5 0 5 10 15 20 25 30

Construction

Education and Health Services

Government

Information

Leisure and Hospitality

Manufacturing

Mining and Logging

Other Services

Professional and Business Services

Trade, Transportation, and Utilities

Number of Jobs (000s)

Job Growth in the Atlanta Metro Area, November 2014 - November 2015

SUPPLY ANALYSIS

$15.13

$24.23

$21.02

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

Murphy Crossing


Office Gross Rent per Square Foot, 2016

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Murphy Crossing Office Inventory Square Feet, 2007-2016

SUPPLY ANALYSIS

$12.00

$17.34

$12.44

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

Murphy Crossing


Retail NNN Rent per Square Foot, 2016

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Murphy Crossing Retail Inventory Square Feet, 2007-2016

SUPPLY ANALYSIS

Strip Mall near the Study Area Nearby Auto Service Shop

Nearby Small GrocerGrocery Store near Study Area

DEMAND ANALYSIS

Type of Store Size Threshold Population Range

Convenience Store 1,200 to 5,000 square feet 1,800 to 2,500

0 to 0.5 mile walk or a less than 5 minute

drive

Market 20,000 to 30,000 square feet 3,000 to 7,000 5 to 15 minute drive

Supermarket 40,000 to 60,000 square feet 8,000 to 9,500 15 to 25 minute

drive

Murphy Crossing Study Area Population: 11,946

Population Threshold and Ranges for Food Retail

Source: Locational Criteria for Grocery Stores, David Bergman

DEMAND ANALYSIS

• Seeks more family than non-family households

• Seeks a majority of households with incomes over $50,000

Whole Foods• Must have more than 36,000

residents with a college degree in total market area

Trader Joe’s

DEMAND ANALYSIS

• Seeks more family than non-family households

• Seeks a majority of households with incomes over $50,000

Whole Foods• Must have more than 36,000

residents with a college degree in total market area

Trader Joe’s

DEMAND ANALYSIS

• Seeks a minimum median income of $50,000

• Some college education or higher• Minimum 40,000 vehicles per day with

access to store

Starbucks• Seeks a minimum median income of

$50,000• Minimum 60% owner occupied homes• 7,000 to 10,000 square foot property

Pet Supermarket

Source: Location Georgia

DEMAND ANALYSIS

$84 Million Spending PotentialTotal Murphy Crossing Study Area Spending Potential

$131 Million Existing SalesTotal Murphy Crossing Study Area Spending

-$47 MillionTotal Retail Gap

¡ A retail gap analysis evaluates the surplus buying power (demand) of residents and workers within the study area compared to actual spending in the study area.

Retail Gap Analysis

DEMAND ANALYSIS

0.00% 2.00% 4.00% 6.00% 8.00%

10.00% 12.00% 14.00% 16.00% 18.00%

Multifamily Vacancy Rate, 2007-2016

Murphy Crossing Atlanta City

Atlanta Metro Area

$1.00

$1.21

$1.00

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

Murphy Crossing


Multifamily Rent per Square Foot per Month, 2016

DEMAND ANALYSIS

$96,640

$290,202

$396,413

$278,906

$195,231

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

Murphy Crossing Krog Street Market Ponce City Market Atlanta Atlanta Metro Area

Median Home Value, 2015

DEMAND ANALYSIS

Neighboring Developments

DEMAND ANALYSIS

Size: 67 acres

Amenities: Stadium, Retail, Restaurants

Current Use: Stadium and surface

parking

Planned Redevelopment: Institutional,

residential, retail, and office.

Owner: Georgia State Univ.

Proximity to Public Transit: MARTA bus

service

Neighboring Developments – Turner Field Redevelopment


CASE STUDY: MURPHY CROSSINGSUMMARY – INTERPRETING

CASE STUDY: MURPHY CROSSING

CONCLUSIONS

¡ Economically and demographically, the Murphy Crossing Study Area is not anticipated to change significantly

¡ Median incomes in the Study Area are low and expected to grow at a comparatively slow rate. Disposable incomes are also low

¡ The Murphy Crossing Study Area is not a traditional office submarket

¡ There is no retail gap in the Study Area

¡ All rents are lower than Atlanta or the metro area, including those for office, residential, and retail spaces


CHALLENGES

¡ The site has a more challenging economic profile than other areas in Atlanta undergoing economic growth in recent years

¡ The study area is growing slower in population, incomes, and rents than other parts of Atlanta. (for now. . . but things are changing)

¡ The core challenge for the site is attracting interest, activity, and demand from beyond the borders of the neighborhood

¡ For long-term success, the project must be a “market creator” and pull significant demand into its local area


OPPORTUNITIES

¡ BeltLine Westside Trail construction will be complete in 2017

¡ Strong regional economic fundamentals

¡ Site in close proximity to the CBD of Atlanta.

¡ Demonstrated regional demand for livable, “market” environments

¡ Funded transportation improvements will increase auto, bicycle, and pedestrian access to the site, expanding the market of any potential development

¡ Diverse existing building portfolio allows for a variety of events and uses


Step 1 – Stabilization / Site Infrastructure Step 2 – Activation and Programming


MURPHY CROSSING 108

Site Stabilization Project Phasing

Interim Site Activation Uses

Mid-Term Site Uses

Long-Term Site Uses

Site Stabilization

Location: The focus of site stabilization will be on areas that will be used in the short-term and areas directly adjacent to the Atlanta BeltLine will be important. However, site stabilization will likely be necessary to some degree across all parts of the site.

Costs: A large portion of site stabilization costs will be the responsibility of Atlanta BeltLine Inc. Other costs may be deferred to individual developers.

MURPHY CROSSING 108

***This diagram is a concept and does not constitute an approved site plan or other use commitment

Step 3 – Interim, low-impact Uses Step 4 – Phased Vertical Development


Request for Qualifications and Technical Proposal

For

Operating Services and Property Management

MURPHY CROSSING

1050 MURPHY AVENUE, ATLANTA, GA 30310

Due Date/Time: Thursday, May 11, 2017, 3:00pm

Pre-Proposal Meeting/Conference Call: Thursday, April 13, 2017, 10:00am

(404) 602-9526 (pin# 1890199330)

Submittals shall be sealed and marked with RFQ Title.

Submit 1 original, 1 complete copy and one electronic copy in a single PDF format (CD or flash drive)

of the Response to:

Atlanta BeltLine, Inc. Attention: Procurement Officer 100 Peachtree Street, NW, Suite 2300 Atlanta, Georgia 30303 Refer written questions by 3pm Thursday, April 20, 2017 to:

Atlanta BeltLine, Inc. Attention: Kim Nicholson, Procurement Officer [email protected]

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CREATING REAL ESTATE MARKETFEASIBILITY STUDIES

NATI ONAL TREASURY C I T I ES ’ SUPPORT PROGRAMMETECHNICAL ASSI STANCE WORKSHOP

24-26 JULY 2017

Documents

Session 5 - Creating Real Estate Market Feasibility Studies