To say that the metro Atlanta area's next residential boom is going to look a lot different than the last one may be an understatement. The strategy of builders during the last cycle was to acquire vast tracts of cheap land somewhere near a major interestate outside of the Perimeter, strip it, throw up houses quickly, and then repeat the process in an ever increasing radius out from Atlanta until they hit the Mississippi River, Appalachian Mountains or the Atlantic Ocean. If you are curious to see some vestige of that of that cycle, you can probably contact any large bank and ask for a tour of their red clay fields in places like Forsyth County.
The Great Recession just may have shocked the residential market back to its fundamentals, and as this Wall Street Journal piece reports, suddenly the old adage, "location, location, location" is being heeded again. Deals for lots in good locations are becoming harder to find despite a still-depressed residential housing market, and parcels in good locations are demanding premium pricing. This is generally good news for the industry, but especially good news for homeowners of existing in town homes. And for those folks who want to see Atlanta build "up and in" instead of out (and out) (and out).
So what will the next "boom" look like? Our money is on the in-fill rush. Single or small clusters of old homes being bought and torn down for new housing will be common, though that play is hard to replicate on the scale that big corporate builders need to keep their machines running. Smaller-scale builders will go back to the fundamentals and look for places that have good development basics (such as close commutes to the city-center) and otherwise attempt to find significant tracts of land that are currently under-utilized. Under-performing strip malls, derelict industrial parks, and failing golf courses all offer opportunities for enterprising developers, and you might see those folks starting to cruise around places off the development radar like Tucker, an established residential community with a good commute to Atlanta's city-center.
Converting previously developed land to neighborhoods is costly, risky and time-consuming compared to building on green land. It requires sophisticated developers willing to battle through the local governmental approval process and take on the risks like legacy environmental issues and attendant liabilities. And increased land acquisition costs mean that builders will have to build denser, smaller housing to get the returns they need. But the depth of the market for this style of housing in the metro Atlanta area on the whole is a matter of some debate if the vociferousness of the opposition to T-SPLOST is any indication.
So, the final picture of this next cycle? We think it will be smaller-scale developments by sophisticated (or risky) developers featuring the conversion of brownfield infill sites into projects featuring higher density and smaller homes. But just about anything will look better than this.