SBA 7(a) Flex Space Feasibility Study in Georgia

Georgia flex space: a ticket well above the national norm

Flex space is a lessor class, which means the borrower owns a building and rents it out, and the loans here are much larger than the nationwide pattern. A median of $955,600 is 1.60x the national figure, the distinctive metric, and half of the loans lie between $500,750 and $1.6 million. SBA recorded 42 approvals worth $53.4 million. Franchise share is 7.1%. Georgia stands at 13 among states by number of loans, and flex space takes slot 21 of 39 in the state's classes. Cancellation reaches a floor of 19.0% on approvals through FY2024, with the ceiling the same.

Where the buildings are

Gwinnett County has 8 loans and Cobb 5, so the northern metro suburbs lead; Clarke, DeKalb and Forsyth have 3 each, and Fayette, Fulton, Hall and Richmond 2 each. No lender table appears for this cell. Approvals were 7 loans and $6.1 million in FY2017, 11 loans and $9.1 million in FY2021 and 5 loans and $9.3 million in FY2023, then 2 loans and $7.2 million in FY2024. FY2025 and FY2026 carry no approvals.

Our limitation for this class notes that lending nearly stops from FY2024. The blank years at the end of the series reflect that change in lending to lessors, and they should not be read as a market verdict on Georgia flex buildings. A reader comparing recent years with earlier ones is comparing two different regimes.

Limits of the code and the study

The code behind this class also takes in office buildings, retail buildings and banquet hall rental, so flex space cannot be isolated from them. Charge-off experience is not rated here, as too few early loans funded. A feasibility study for a Georgia flex building should test the tenant market: vacancy and rents for comparable light-industrial and office-service space in the submarket, the type of tenants likely to sign, and lease terms. Where the borrower occupies part of the building and rents the remainder, the study should show both streams. Construction or purchase cost per square foot, clear heights, dock access and parking all affect leasing. Present coverage twice, once with the building full and once with vacancy at a lower level, and state how long leasing takes. The appraisal will lean on market rents and vacancy, so the study must justify them.