Childress Klein Eyes Multifamily 'Missing Piece' In First For Its Galleria Office Park
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Where once was planned a seventh office building at the Galleria Office Park, a prominent developer is shifting gears with a new apartment project for the first time in Atlanta.
Childress Klein Properties — one of the largest commercial development firms in the Southeast with more than $1B in assets — is planning a 283-unit apartment project connected to the Galleria office park on a pad site originally slated for another office building.
The developer is currently seeking zoning approval to transform the office site into a $63M multifamily project being called Galleria 800 Apartments.
“We've been doing apartments all over the Southeast for a while now, but this is our first apartment in Atlanta,” Childress Klein Managing Partner Gordon Buchmiller said. “We're talking to folks about financing now, but that doesn't appear to be a problem."
A majority of the units will be one- and two-bedroom apartments, with a smattering of three-bedroom units, Buchmiller said.
Childress Klein's plans represent a 180-degree turn for the site, which is off Galleria Parkway near its intersection with Cobb Parkway.
The site is currently owned by the Institute of Nuclear Power Operations, which was at one point planning a build-to-suit office building there, Buchmiller said. INPO is located in Galleria 700 now and has owned the land since the late 1990s. Childress Klein has the site under contract, Buchmiller said.
"They reached the conclusion ... last year that they didn't need the site for expansion, and we offered to purchase this site,” he said.
Buchmiller called plans for Galleria 800 Apartments the “missing component” of the Atlanta Galleria Office Park, where six office towers lord over the interstate connections between Interstates 285 and 75.
The office towers are Childress Klein's hallmark project in Atlanta, one that began with the delivery of Galleria 100 in 1982 and now encompasses not only the other office towers, but also the Cobb Galleria Centre convention facility and specialty mall and the Renaissance Atlanta Waverly Hotel. The convention center itself was developed by Cobb County.
Despite its office focus in Atlanta, Buchmiller said Childress Klein sees more demand for apartments at Atlanta Galleria than more office at this point. The opportunity will give the developer its entrance into Atlanta's multifamily market.
"Frankly, I think we've just been focused on other markets," he said. “We just think that there are over 4,000 people who work here at Galleria. Frankly, it just made sense. It's the missing piece. We think this is going to be a pretty significant demand for people who work here.”
Childress Klein is well-versed on multifamily elsewhere. It just completed a $100M project called Element Music Row, an apartment tower in The Gulch area of Downtown Nashville near Vanderbilt University. And it has a host of other apartment projects in the Southeast, including three in Charlotte, among them Museum Tower, a 43-story apartment high-rise built over the Mint Museum in Uptown Charlotte.
Childress Klein is the latest in a line of developers who are betting on Class-A apartments in the Cumberland/Galleria submarket of Cobb County. Galleria 800 Apartments would not deliver until 2020, but Atlanta's current apartment market has been cooling with a plethora of new supply.
The high-end apartment market took off in the Cumberland/Galleria submarket thanks in large part to The Battery at SunTrust Park, the new Atlanta Braves stadium and mixed-use development where more than 500 apartments by Pollack Shores have been built and are now leasing.
Since 2012, 10 Class-A apartment projects totaling 3,100 units have sprouted up in the area, according to Haddow & Co. That is a massive jump from the period between 2000 and 2011, when developers only delivered 932 Class-A units in the area.
As of December, developers in Cumberland are underway with an additional 1,100 units and have another 1,700 units proposed in the pipeline, Haddow & Co. Vice President Ladson Haddow said.
“That's a whole lot for that area compared to what they've seen in the past,” Haddow said. "The market is averaging $1.60/SF for rents, with apartments at SunTrust Park gaining the most in the area at just over $2/SF."
How that could affect demand going forward remains to be seen. Pollack Shores Development Vice President Tyler Gaines said there has been a leasing slowdown this past winter, but the developer expects leasing velocity to pick back up come the start of baseball's regular season.
“Across the market in general, I think you got the tail end of the winter season, which is always a slower season, combined with all the new projects,” Gaines said. “If you're a renter right now, there are so many projects in lease-up that are beating each other up. And that's not unique to Galleria.”
Mill Creek just began leasing its Modera Vinings project two weeks ago, so it is still too early to tell if the winter leasing slump will affect things for the developer, Mill Creek Senior Partner Chad DuBeau said.
This is Mill Creek's sixth Modera building in Atlanta, with two more in the planning stages. DuBeau said Mill Creek is aiming for $1.90/SF rents at the Cumberland project.
“We expect some softening, [but] we can absorb some softness,” he said.
But he said Mill Creek's Sandy Springs Modera project, which is very similar to the Cumberland one, is showing leasing strength despite all the new supply in Atlanta, with six to eight new renters a week.