Midtown's Tech Triumphs Take Shine Off Bank-Heavy Buckhead Offices
Midtown Atlanta is the hottest office submarket in the city, drawing the most leases as well as some of the highest rents in the metro area.
What a difference 10 years makes.
“The big winner, the submarket that has been the big winner for tech-related companies is Midtown. Indisputable,” Highwoods Properties Vice President Jim Bacchetta said. “That has been a lot of the net absorption in the past five years. But we still have very strong activity in Buckhead for users of all types.”
Atlanta's toniest submarket will be the focus during Bisnow's Future of Buckhead event Oct. 24, where the market's office sector, as well as burgeoning hotel and multifamily sectors, will be a key discussion topic.
Highwoods is among the largest office landlords in Buckhead, owning 2M SF that includes One and Two Alliance Center as well as Monarch Plaza and Monarch Tower. But even Bacchetta concedes that when it comes to tech-related jobs — and companies chasing tech employees — Midtown has become the go-to market.
Job growth in Metro Atlanta averaged 2.3% a year for the past five years, surpassing the national average of 1.6%. This year alone, employers in the metro area are expected to add nearly 69,000 new jobs, according to Georgia State University. Since 2010, the metro area also added 53,000 new tech-related jobs, which encompassed nearly 10% of the entire region's workforce last year, according to the Cyberstates 2019 report by CompTIA. The metro area now ranks 10th in the nation for tech employment.
Transwestern Director of Research Keith Pierce said that in part is why Midtown has gained so much momentum in this cycle.
“Tech companies want to be in Midtown because of Georgia Tech,” he said. “I think Buckhead has a perception of a banking and professional services and real estate neighborhood.”
Newmark Knight Frank Executive Vice President Sean Moynihan agreed with that sentiment. The story of Buckhead's office market this cycle is one of two different industries, with financial and professional service firms continuing to prefer Buckhead towers over the Midtown landscape.
“I don't see people leaving Buckhead to go down to Midtown,” Moynihan said.
As Bisnow previously reported, NKF's Atlanta branch, currently in Monarch Tower, is in the market for new office space. It is a search that no longer involves Midtown, Moynihan said.
“No one has said [we've] got to be in Midtown to help with recruiting,” he said. "Let's put it this way: We're not looking at Midtown."
So far this year, companies absorbed 149K SF of Class-A Buckhead offices, according to data provided by Transwestern. At the same time, landlords in Midtown absorbed 389K SF. Developers have also started construction on a plethora of new office projects in Midtown, while in Buckhead, nothing new is underway.
The types of rents needed for newly constructed office may in part be why Midtown has — for the first time — surpassed Buckhead's average asking rent for Class-A offices at $38.20/SF, according to Transwestern. Prior to this year, Buckhead maintained the highest average Class-A asking office rents in all of Metro Atlanta. Midtown Class-A office landlords are asking nearly a dollar more per foot than their counterparts in Buckhead.
While the average apartment rent in Buckhead is just over $2/SF — some 20 cents less per SF than Midtown on average — developers are unleashing more units in the submarket than in Midtown, 1,600 to 282, according to Haddow & Co. data. Durrett said this is encouraging the submarket to focus on walkability, especially with the expansion of Path400, Buckhead's version of the Atlanta BeltLine.
“I believe that what is changing is there is an expression of people valuing walkability and connection to transit in a way that has not been expressed before,” Durrett said. “It's a recognition that we've got to invest in things [other] than moving automobiles.”