Who Will Have the First New Tower?
Welcome to post-recession Atlanta. To guide you through the new terrain, we're gathering the city's top real estate experts at our fifth annual Atlanta State of the Market event on April 24 (sign up here). And we're already hearing new office development may be in the cards. (We like shoveling dirt more than snow.)
One of the biggest impacts on office space post-recession has been technology, according to Daniel's Pat Henry, who'll be speaking at our event. (He's snapped here with NYT bestselling author and wife Patti Callahan Henry.) The tech infusion has created more efficiency in the real estate market, leading tenants to do more with much less office space.
By all indications, Atlanta's office market has returned. While overall metro Atlanta office vacancy still hovered just over 20%, Q1'14 alone absorbed 700k SF, according to CBRE. Deals that helped make that happen include Fiserv's 376k SF in North Fulton, Seimens' 177k SF on Triangle Parkway in Peachtree Corners, and Allstate's nearly 100k at 3200 Windy Ridge. (The chart proves we all slacked off in Q4'12, most likely because we were all riveted by the 2012 European Curling Championships being held at that time.)
This kind of market tightening means someone's going to go forward with Atlanta's next office tower. There are many players jockeying: Tishman Speyer in Buckhead; Hines Interests in Central Perimeter; Ackerman & Co in Central Perimeter; and Daniel Corp in Midtown. Aside from its famed 12th & Midtown project, Daniel is also marketing a 2M SF mixed-use development for Metlife at 17th and Spring streets, where the famed Nan Thai restaurant is located (an early Daniel rendering here).
It's the way the new generation works as well, says Cushman & Wakefield's Andy Ghertner. Hoteling and other alternative work environments are everywhere. Despite folks taking less space, developers are still feeling the pressure to get out of the ground with a new tower, he says. Historically, whoever is the first out of the ground in a development cycle here does fine, but as more and more players jump in, "somebody's going to get hammered.” (It's like a pool. Last one to jump in is going to land on someone.)
JLL's Jeff Bellamy (right, with Jeff Frantz) thinks Atlanta office landlords are going to have a good time in this market. But like others, space allocation has diminished for users by at least 50 SF/person (pre-recession, the average was generally around 250 SF). As companies cram more people into less space, it means that landlords who can offer a denser parking environment will be better off, Jeff says. (You could build a flying car, but the true genius will always be the one who builds a flying parking garage.)