The 2013 Fortune 500 List – Atlanta Companies and what they mean for Real Estate

A few weeks ago I received my copy of the 2013 Fortune 500 in the mail.   Only today while killing some time at Grindhouse Burgers in Buckhead was I able to get a good look through it.    Before delving into 2013′s list and what it means for Atlanta let offer some background with regard to my thoughts on the list, the companies and what they can mean to a local real estate market.

Let me first start by mentioning my thoughts six years ago,  when abandoning NYC in 2007 I told my many friends in California and New York about how Texas was leading the nation not only in new job growth, but also,at that time in the Fortune 500 with more companies then either New York or California.    I checked this year’s edition and both New York and California actually went ahead and edged out Texas, but at the time in 2007 it was an inflection point for Texas.   Even during this past recession, while places like New York, California, Florida and Georgia were hit hard, Texas remained rather unscathed.      The numbers, the analytics simply did not lie, Texas was economically where the growth was happening.    having wind in your sail, in a macroeconomic sense is one of the keys in Real Estate.

I was In Dallas after only a few weeks and I knew where to purchase my first property there.      Within 3 miles of my home in Dallas (Plano) are three fortune 500 companies.    Compound that with numerous freeways, top tier public schools, shopping and prime dining and I figured that it must be a winner.     You see, even when I look at the suburbs of Atlanta, it is not hard to see where prices are low and will maintain a low growth rate.  Simply look at schools, and proximity to Interstate freeways and you can see current desirability and in my head I see further divergence once gasoline hits $5 to $6 a gallon.    In the interim, as my hypothesis plays out, rents become cheaper and cheaper (relatively) in less desirable places.     This will lead to a further deviations, making less desirable communities with poorer schools, and more undesirables and likely more crime.   On the opposite end of the spectrum you will have winner-take-all public schools with large coffers to continue their funding of everything from an International Baccalaureate Curriculum to a full Lacrosse team.     Indeed, as I look forward to Real Estate in the coming years as an investor and landlord I keep these two extremes in my mind with regard as to what direction ultimately a property and perhaps even a whole community or city is heading.

Back to the value of having Fortune 500 companies in your State, City and more specifically in your neighborhood.      All of these Fortune 500 companies are big.   Not just big, but huge and are measured in terms of revenues.   There are scores of profitable software and real estate firms that make money hand over fist with minimal amounts of people but with large amounts of leverage (Real Estate) or specialization (Software).   Although highly profitable, these companies may not employ that many people, and their Corporate Headquarters may not nearly have as many warm bodies as say a retailer or a consumer products company.     I bring this up to point out the fact that Fortune 500 companies tend to have a large number of employees.  Of these employees who work at a corporate headquarters, many are paid well and are secure in their career.   in secure, I would argue at very least, more so then someone not working within the Mother ship.      That said, I suspect that these are the kinds of individuals who are more likely to purchase, keep, maintain and improve their real estate.

Moving on, OK so Georgia has 16 Fortune 500 Companies.     When I seek my next home OTP in Georgia I most definitely keep all of the ones in the Atlanta Metro area in mind.   Here are the 16 companies for Georgia-

Atlanta: Home Depot, UPS, Coca-Cola, Delta, Southern (the people who run Georgia Power), Genuine Auto, Sun Trust Bank, First Data, HD Supply (Home Depot Supply Spin Off), Coca Cola Enterprises (Bottler), and Newell Rubbermaid

Duluth: Agco, NCR

Norcross: Rock-Tenn (this is the only one I was not familiar with, seems to be a packaging company, a 9 billion dollar one)

Far away distance provinces of Columbus and Calhoun: AFLAC, Mohawk Industry (think flooring)

OK, so in this list above, most every single one of these companies is doing well right now.    I strongly believe that is one reason that Atlanta is currently one of the top 5 markets in terms of price appreciation right now.     In considering a flight to suburbs, or high quality rental properties, one should most definitely consider the large employers such as these Fortune 500 companies.
As an example of a hot area in the Atlanta Metro home market is Northern Duluth, Johns Creek and Suwanee.   Recently in Northern Duluth Primerica (over a 1 billion dollar Insurance company recently spun off from Citigroup) just opened a new corporate Headquarters.    it is with 1/4 of a mile from I-85.   Similarly, Mitsubishi North America Heating and Air System just opened their new Headquarters in Northern Duluth at the edge of Suwanee.    Again, less then 1/4 mile from I-85.     Given the large demand for $150-350k housing in the area I am not the only one who has taken note of this.   Not only are those who are now working in these spaces buying properties hand over fist, but so are investors who see stable tenants, and strong supply and demand dynamics at play for the next decade to come.

Obviously the vast majority of the above is not related to condos.     That said, economic dynamics like those listed above are still important.   As opposed to schools and proximity to Interstates, it is understandable that walkability is in fact the main driver in Urban Condo markets.      As opposed to large Fortune 500 companies, in the Atlanta condo market the employers driving the market are more often Law Firms, Consultant Practices (large and small),  Medical professionals (Doctors and Nurses), empty nesters, and students at all levels of their education.       Schools matter, but not so much like they do in the suburban grind.      Proximity to interstates?  Again not so much.  Recently when tracking down an appropriate property for a client in the highlands he actually did mention the difference between 5 or 10 minutes to get to the connector.   I was kind of surprised.   nevertheless, for many who do a reverse commute daily, or perhaps travel often for work being close to highways has its advantages.

Last week I ran the Eastern segment of the Beltline.  Oh yes, hot and humid, it was about a 5 mile run from The Viewpoint to Piedmont Park to the Beltline down to the end of it in Inman Park and back.   This Beltline stretch was PACKED!   I could not believe how popular it was.   It also helped to confirm why so much of the Real Estate in the area has been selling so quickly.  This area from Midtown to Ponce Central Market down to Inman Park is developing fast and in fact furiously.      I think about Dallas and its Katy Trail, or New York and what is being developed around the High Line Park and my wheels really start turning in my head.      This is something big in the Urban scope of things.    More on this in the future, but if you have not ventured on this small, yet important 2.25 stretch, then you should today.

Enough rambling for one night.       Final end notes-

-$6 gas (coming sooner then we all think) will continue to drive divergent prices both in Condo Markets and in distant McMansion communities

-Suburban school systems will continue to diverge as rich communities receive more funding and poorer ones receive less.

-Inner city school systems will benefit from suburban flight to Atlanta condos.    These districts will also receive higher funding as the surrounding Real Estate prices increase.

-Real Estate markets (in the burbs) will be more dependent on large “Winner take All” Fortune 500 Employers.

Good night

Andrew Doyle