Development At Underground Atlanta Curtailed Due To Market Conditions
A major Downtown Atlanta landlord is pulling back on new development at its flagship Atlanta mixed-use project because of the escalating costs of capital and construction materials.
Lalani Ventures CEO Shaneel Lalani said the company will focus on leasing up the existing space in Underground Atlanta rather than undertaking previously planned development additions to the iconic venue.
Speaking at Bisnow’s construction and development conference at The Carlyle on Dec. 4, Lalani said the current market conditions are making new projects difficult to pencil.
“With Underground, we would have loved to have cranes in the air, but it’s just impossible right now given the market conditions,” he said. “We’re at 60%, 65% occupancy right now. We’re trying to make a push to get as much ready as we can before the World Cup next year.”
Panelists said the mantra of “Survive to ‘25,” repeated by many industry experts, was overly optimistic, especially when it came to capital. Geopolitical and economic uncertainties are plaguing capital and debt confidence, making it difficult to get funding for anything but the least risky of new developments, they said.
“The mantra of ‘Survive to ‘25,’ which ironically was said back in originally ‘23, didn't come true,” Coro Realty Advisors President Robert Fransen said. “You can almost predict how fast it's going to recover by how fast it goes down … and so our sense is that the recovery is going to be kind of slow.”
A September survey of more than 850 global real estate executives by the consulting firm Deloitte painted a similar picture, with leaders expressing more measured and muted optimism for 2026 than they did for 2025.
Top of their list of worries was capital.
The three largest concerns of those surveyed were capital availability, elevated interest rates and cost of capital, according to Deloitte, “all likely tied to concerns around accessing CRE debt markets, coupled with interest rates that are still perceived to be higher for longer — a recurring theme from last year’s survey.”
Since the survey, the Federal Reserve has lowered interest rates by 50 basis points in two cuts.
But those cuts may have little effect on debt and capital’s willingness to fund new urban developments, Portman Residential Managing Director Harvey Wadsworth said. Capitalization rates are a better monitor for spurring new development.
“You know, our financing is not tied to the Fed fund rate. It's tied to whether it's [secured overnight financing rate] or Treasuries or whatever,” he said. “And these things are highly correlated, but they're not perfectly correlated … they're not following in lockstep.”
In this climate, Fransen said capital and debt are especially gun-shy of “complicated, mixed-use, multiphase” projects at this point.
“Any of those terms are just hard to fundraise for because that sounds to investors like, ‘Oh, that could be a two-cycle deal’ or 'That could be five years from now.’ And who knows where rents are and who knows where interest rates are?” Fransen said.
Like Lalani Ventures, Selig Enterprises is focusing on its existing portfolio of Metro Atlanta properties and working on rezoning many of them to maximize their density to eventually allow for a mix of uses that could break ground in 2027, said Malloy Peterson, the firm’s senior vice president of development.
As an example of the rezoning possibilities in Selig’s portfolio, Peterson cited the firm’s Logan Circle industrial property, a sprawling circa 1960s warehouse campus just north of its The Works project in West Midtown, where Selig recently completed an $18M, 550-space public parking deck. Peterson said Selig is taking the property through rezoning to allow up to two more multifamily projects as well as more office and retail.
"We're looking at how to phase things to get things done. And so, actually, it looks a little more like downsizing, or maybe rightsizing for what is going to be doable and possible,” she said.
