Labor Costs Hampering Office Development?
Labor and construction costs are a big topic of conversation among our panelists next Tuesday, Feb. 17, for Bisnow's 3rd Annual Atlanta Construction & Development Summit, starting 7:30am at the St Regis Hotel in Buckhead.
Seven Oaks Properties' Bob Voyles says construction costs are up as much as 8% from last year, primarily driven by labor costs. That's partly due to the massive number of huge projects underway in the metro area right now — including two stadiums — but also due to the fact the Great Recession diminished the subcontractor labor force as those workers went elsewhere for work, Bob says.
Seven Oaks is currently pricing two potential developments in Central Perimeter at its Perimeter Summit office park (here) to field the many tenants scouting the market: the 400k SF 4004 Perimeter Summit and 9009 Perimeter Summit, a planned build-to-suit office building up to 350k SF. But those higher rents are part of a sales pitch to potential tenants by Seven Oaks, Bob says. Think they're bad now? Wait another few months. “Atlanta's going through a general upsurge with the recovery economy…and the expansion of existing businesses,” he says. Last week, we reported Seven Oaks also is working on plans to start work in Riverwood 200.
Pope & Land Enterprises' Mason Zimmerman does say the big developments — including the mixed-use project that is being developed by the Braves, JLL and Pope & Land in a JV with Fuqua Development and Pollack Shores next to SunTrust Plaza — are affected by a limited labor pool in Atlanta, which is causing construction prices to rise. And, yes, that may give some developers — particularly office developers — pause before breaking ground. “Most of the areas in the metro area are very active right now and some in rather bold ways. We've never had two $2B billion sports-related projects going on at the same time,” he says.
Regent Partners' Adam Allman says the stadium developments are only a mild factor in construction costs going forward. That's because those projects are “known qualifiers.” Regent, of course, is eyeing the start of its Buckhead skyscraper some nine months from now, and Adam says the firm expects construction costs to be a “little higher” than they are today.
Regent is currently hard at development work not in Atlanta, but Nashville, where it's planning a hotel/apartment mixed-use development at 19th and Broadway, Adam says, including a 180-room hotel and a 250-unit apartment. It's also developing a Hyatt House in Charleston that's slated to open in May. To hear more, please join us next Tuesday, Feb. 17, for Bisnow's 3rd Annual Atlanta Construction & Development Summit, starting 7:30am at the St Regis Hotel in Buckhead. Sign up here.