State Farm's Future Impact on Central Perimeter
By the time you read this, Gov. Nathan Deal, dignitaries from Dunwoody, and business leaders in CRE will be celebrating the start of KDC's new State Farm campus in Central Perimeter. (That's right, they started without you.) Since we have our 4th Annual Future of Central Perimeter event May 20 (tickets here), we asked some of our panelists what ripple effects a 2.2M SF State Farm campus will have on what's turned into one of Atlanta's healthiest submarkets.
KDC initially plans to develop a 550k SF office building that State Farm will move into by 2016. But ultimately, the mixed-use project will include 2.2M SF of office and retail right at the doorstep of the Dunwoody MARTA station. (They should put a car dealership in, and then you could go get insurance. That's called synergy.) Meantime, State Farm's consolidation into the submarket has been a boon for landlords. Most recently, the firm inked a 60k SF deal at 115 Perimeter Center Place, according to a PM Realty Group report. And State Farm's overall activity has helped drop the Central Perimeter vacancy rate—once among the highest in Atlanta—down to 16.4%, according to Colliers International. It's even healthier with the Class-A space—a little more than 12% (Q1 alone CP saw 325k SF of positive absorption).
Dunwoody Mayor Mike Davis, who'll be speaking Tuesday at our event, says State Farm has been a positive transformation for Central Perimeter (and Dunwoody, where the project will locate). “The whole live, work, play concept… is already here in Dunwoody,” Mike says. “We consider this to be the direction that most businesses will be wanting to go in the future.” Even though State Farm has gobbled up more than 1M SF of prime office space there, Mike says he doesn't foresee a problem with landlords back-filling it once State Farm vacates to move into its campus. “As State Farm leases come and move out of a bunch of the property they're in, that'll be grabbed by the businesses who want to be here.”
JLL's Kay Younglove (who also is a member of the Perimeter Community Improvement District) says KDC's development is ideally situated to take advantage of the Flyover Bridge off Perimeter Center Parkway, and should help even out the additional traffic from State Farm. And it was just announced that Georgia plans to fund more than $200M into the Ga 400/I-285 interchange improvements, a focus of the PCID now, Kay says. “State Farm is going to have a tremendous presence here. And just as Cox has been a great sponsor for the area and corporate citizen, I certainly would expect State Farm to be the good neighbor they advertise themselves to be.” (That means no late night keg parties with loud music, State Farm. We're serious about that.)
But not everyone thinks it's going to be so easy for landlords to backfill the coming hole—especially when Intercontinential Hotel Group is considering leaving its HQ space at Ravinia to anchor a new development. “The verdict is out if there's going to be all that momentum to absorb the space that's going to come back,” says DTZ's Chris White, our moderator on Tuesday. Luckily, much of the State Farm space will expire on a staggered basis anywhere from five to 10 years from now, which will prevent a sudden deluge of empty space into the market.
"I don't know what's going to happen six months from now versus five years. I think that's somewhat of a glass half empty versus glass half full argument,” says SDM's Steve Martin (another panelist, here on left at our last event with CBRE's Chris Port). “Could it potentially be negative? Yeah, but I don't sit around worrying about it.” (Leave the predictions of the future for the people on reality TV shows.) In the meantime, State Farm has been pushing out smaller firms at The Terraces which benefits his building, 200 Ashford Center North, which has been leasing spec suites “almost as soon as we get them finished.”