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Who Will Build Atlanta’s Projects?

(via GlobeStreet)

ATLANTA—Incremental improvements in Georgia’s banking scene, a booming film industry and the need for a long-range transportation improvement plan were among the issues discussed by a panel of local power players at the RealShare Atlantaconference, held last week at the Georgia Aquarium here. As in other sessions earlier in the day, the big topic of discussion for speakers on the “State of Atlanta Real Estate” panel was the market’s shortage of construction workers.

John White, senior vice president of Skanska USA, is particularly concerned about a critical shortage of construction labor in the region. He noted that a large percentage of skilled workers are older and heading for retirement. About 900,000 have left the industry during the past few years, he said. “From a construction point of view, there has been a shortage of skilled construction labor for a long time. It’s a bubble that has been with us a long time. About half of the skilled construction work force will go into retirement in the next five years and we will see a bump in labor costs. It’s something we all need to deal with.”

Moderator John Ferguson, president of the Southeast Region for CBRE, noted that the trend in construction is for buildings to accommodate more people in less space. That’s in conflict with Atlanta’s historic love of the automobile.

“We have to solve the parking problem and get people onto mass transit,” Ferguson said.

Ellis agreed: “We believe in mass transit simply because we have to. Urban parking ratios will not go up. We are very focused in Atlanta. It’s important for us that our projects that a MARTA (transit) stop be within two blocks of walking distance…walkability is what’s attractive to millenials. They like to live over retail and walk downstairs and get their coffee.

The film industry is growing in the metro Atlanta area. One of the big recent projects was the location of Pinewood Studios’ US operations to Fayette County. “We’re creating an industry,” saidJim Pace, CEO of Group Six, which was the project’s developer. “Pinewood is an engine that has created thousands of jobs. We acquired 800 acres and are creating the highest-density development in the county’s history.

“We are not really banking the real estate, you bank the business,” Pace said. “We had to take a deep breath and say that if this industry comes here, it will stay here. It will stay here as long as the tax incentives are here. We aren’t getting post-production work here because we don’t have post-production work as part of the tax credit. If we keep the tax credits the State of Georgia will be the new Hollywood. I believe there are 52 movies filming here this year and I believe that’s more than in Hollywood.”

Meanwhile, there is a slow, but steady improvement in the outlook for Georgia’s banking industry. “Georgia was the Number 1 state for bank failures during the downturn and the industry was hit very hard,” said Brian Bailey, senior financial policy analyst for the Federal Reserve Bank of Atlanta. “The positive news out of that is that we are beginning to see growth in balance sheets from a commercial real estate perspective. We are moving in the right direction, but the tough part if getting construction loans, which can be a real chore.”

Bailey noted that there has been a gradual uptick in construction loan approval. At the end of the fourth quarter of 2014, Georgia banks had $8 billion in construction loans on their book, which is far below the level during the downturn, he said.

Everyone agreed that the Atlanta region has its work cut out for it in dealing with its legendary bad traffic. “The City of Atlanta has historically done a poor job in matching up projects with transportation,” White said. “There has been more emphasis on housing.”

“We’re just playing catch up in the Atlanta region,” Ellis added. “We didn’t do anything for 30 years, but not the need has been recognized and we are starting to do something about it.”

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