Hey there, Dr. Eric back again to give you an update on the outlook for the Woodstock market. As some of you know, I am the chiropractor turned developer because I have owned a ton of brick and mortar businesses over the years (so owning vs. renting has always been a massive effort of ours) and because I love the concept of New Urbanism, where we design the new to look like the old (meaning forget suburbia where you have to drive to everything, and where you design your developments to serve cars more than they serve people), and to replace that with small urban settings where pedestrian activity is at the heart of all design decisions. I LOVE that!
So, now that we have thrown out some background, let me provide some color for what drives my opinion on the Woodstock market.
I am actively developing 7 acres in downtown Woodstock, I am in process non design for an additional 5.5 acres in Woodstock as well. I am actively developing a continuous 4.5 acre site in downtown Crabapple (Milton), a 3 acre site, and a .7 acre, 9 townhome site. I am actively developing and building ten single family homes along the Alpha-loop in downtown Alpharetta, as well as a 5 unit condo building, and two mixed use buildings at about 25,000' each on North Main Street. In addition, I am close to beginning a mixed use project in downtown Duluth, I have a mixed use lot that I am close to purchasing in downtown Sugar Hill, and I am always analyzing values vs. cost of land and finished product across the orthern suburbs of Atlanta.
Basically, I am involved in almost all comparable markets across the top end (OTP) of Atlanta. One of my main methods of valuation, is to separate out macro economic considerations, and to apply micro economy trends across these markets. For example, on the macro level I would be remiss if I wasn't actively reading (I read the WSJ every morning), and gathering opinions from the Fed actions regarding interest, inflation, and ultimately economic outlook. But in 2008 when I lost my first development project, I didn't just close up shop and forget about it... instead I looked at why Woodstock was spinning out of control like most economies, but Roswell was hanging on to its value. Over time, that has helped me identify a very useful comparison tool, one which provides useful analysis for a mixed use developer, in every market.
Commercial vs. Residential discount rates. On the top side of Atlanta, I use Alpharetta as my standard, as it tends to have some of the highest values in real estate. With Avalon having set the standard in master planned retail communities, and hitting extremly high valuations on the associated residential, it offered a glimpse into the potential of highly sought after new urban development in what was known as a suburban setting. The city leadership then took it into their hands to really "set the table" for future growth, by taking a town with no city identity, developing a new city center complete with a city hall, park space, and oodles of structured parking, and just like that their downtown exploded out of the ground in a few short years. Add the hotel and conference center, more and more amenity to support that, and just like that you have a destination city that is thriving at all times.
So considering the values of the residential and the retail in that city, help to get us a benchmark for what people will pay for a dense city, with walkable access to close to five dozen restaurants from Avalon or city center, with immediate vehicle access to 400, bringing Buckhead and downtown Atlanta within a 30 minute drive (sans traffic of course), and to national brand shopping, and with the access to the Technology corridor of 400, a ton of high level jobs/businesses and professional career opportunities.
What does all of this access get you? The image that I have included on this article is of 92 Thompson Street, of which I am a development partner. The 5 unit condo building will offer 4- 4,500' condos that will be sold to "Partners"... yep, all buyers are buying at cost, crazy way to do this... but with the cost at $2.2mm for your garage, and the SHELL of your condo. The finishing of walls, cabinets, counters, fixtures, floors, and architectural specialties will likely run between $100/sf on the low side, up to $200/sf on the high side, depending on what they want their finished product to look like. And the 8,000' penthouse is already sold.
The development right next door is my 10 - single family development, and we are under cosntruction for the first house which is pre-sold mid-pandemic, for $1.4mm for a 4,000' home. We anticipate the next home that will be similar to this home to go for $1.8-$2.0mm. By comparison, a similar Woodstock home would be sold for about $1.2mm. When we consider this discount, and other discounts in the $600k + market, I find that the discount rate between Woodstock and Alpharetta on the residential side, is between 20 and 38%. Meaning you can buy the same or similar product in Woodstock for 20-38% less than what you would pay in Alpharetta. That alone would suggest that Woodstock is a great place for an investment property, but let's take a little dive into the story of Woodstock first, and then we will wrap up by comparing this discount rate to the retail/commercial discount rate.
Woodstock made it into the Money magazine top 50 places to live in 2015 by hitting number 50. Awesome thing to see, and it spurred on my desire to buy up as much of Woodstock as I could (I have also run at least one business, and at the height, three businesses in Woodstock starting in 2001 until present time). Some of the amenity that caused this decision by Money magazine includes the access to local parks and recreation with Lake Allatoona on our door step, access to regional quality mountain bike paths from your bike (you can bike to the paths), river activities with Little River, reasonable housing (hint, hint, hint), and the access to the Outlet Shoppes at Atlanta, just 1.5 miles from downtown. Are you starting to see some similarities to Alpharetta? Add the express lanes which allowed me the ability to get to the airport in under 40 minutes recently (6:30am departure, so I was a little ahead of the rush hour, but 38 minutes from parked to parked... amazing). And these additions are what moved Woodstock up to number 17 on the Money Magazine List in 2020, and 31 in 2021. This city has fully arrived.
We can further add a new outlier that I didn't expect, but I love. Woodstock city government. With the addition of Michael Caldwell as our new mayor, and a HUGE commitment to Class A office, I can nearly guarantee that we will begin seeing more and more professional jobs come to the area over the next 2-5 years. And those jobs will fuel the growth of residential values.
Now... let's add the comparison of the discount on commercial, and now you will understand why it makes sense to not look backwards at Woodstock values and think, "Oh my, it is so expensive, that is crazy..." because local Cherokee county residents have been saying that for the last decade, and have watched the property values rise and rise and rise without participating in that gain. But if you look forward to its comparison cities, and where they are "trading" you will see we are at an incredible discount, and holding real estate here is worth it. Absolutely worth it!
So, we are targeting lease rates for restaurant around $52/sf in our Alpharetta project with NNN leases. You can look all of that up if you want to better understand it. In the same building, retail would be a $45 rate, and office is around $39 depending on its view and floor, and total size. Comparing that to our Woodstock numbers of $46, $40 and $37. Compare the discount.
Restaurant trades at a 12% discount, retail at 12.5% and 5%. The reality is that over time the discount rates will narrow, they have to, they always do, so if you are looking for a place to live and make some money... come to Woodstock. Residential is going to grow at a rate faster than commercial, and faster than all of its sister cities. This is one of the major reasons why, as a developer, I am still looking to start projects, not just to finish existing projects. Thanks for taking the time to deep dive with me, I hope to see you around town!