After Losing Emory, Decatur Office Owner Sinks Millions Into Renovation
The owner of a Downtown Decatur office building is unveiling its rebirth this summer in the quest to capture tenants who are seeking out new and renovated properties throughout Metro Atlanta.
The RMR Group, a global alternative asset investment firm, is renovating 101 West Ponce de Leon Ave., a 112,500 SF office building in Downtown Decatur, after it lost its longtime tenant Emory Healthcare when the medical group moved to the former Sears space at Northlake Mall.
Those renovations include new common areas, a new lobby, a tenant lounge and a new facade. RMR purchased 101 West Ponce, formerly known as Decatur Plaza, for $22M in 2012, according to Reonomy, a real estate database. At the time, the building was fully leased to Emory Healthcare, Doyle said, and RMR planned on the tenant staying for the long term.
“They did not anticipate getting the building empty,” she said.
According to records with the DeKalb County Tax Commissioner, the building is currently valued at $20M. RMR didn't disclose how much it planned to spend on the upgrades, but Doyle told Bisnow it would be in "the millions."
RMR is just the latest owner of suburban office and older office buildings facing a critical juncture: How to renovate and rebrand what could easily become an obsolete property at a time when tenants are using their spaces to attract and retain their workforce.
Jeff Shaw, the CEO of Bridge Commercial Real Estate, which owns nearly 13M SF of office throughout the U.S., said owners of older properties are facing a situation where they have to reinvest in the buildings to be competitive today.
“It can be really hard when you're in a market where there's a flight to quality,” Shaw said. “If you haven't made those investments, you're going to find yourself in trouble.”
Many companies signing office leases are looking at upgraded spaces in office buildings that are endowed with amenities and other extras as they lure employees back to the office.
“What you'll see, in my opinion, is vacancy rates in older buildings will be much higher than in new buildings or buildings that people invested in to upgrade and adapt,” said Arun Nijhawan, managing partner at Lucror Resources, which owns the historic Flatiron Building in Downtown Atlanta.
In the Atlanta market, where the unemployment rate stands at 3.3%, not only are companies struggling to find new workers, but they also are focused on keeping the ones they have, experts say. That has many tenants using their office spaces as ammunition in the war for talent.
“It's not just, 'Hey, do you want to work for this company?' It's, 'Hey, do you want to work in this office building?'” Colliers Senior Vice President Heather Lamb said.
Many landlords today are adding features to their buildings like outdoor gathering spots, coworking lounges, coffee bars, recreation areas and upscale cafés or restaurants. Doyle said of the office owners her team represents in Metro Atlanta, 75% are making capital upgrades to their buildings.
Back in 2015, Lucror invested $12M in a six-month renovation on the 11-story Flatiron Building, which was first built in 1897 and is Atlanta's second-oldest standing skyscraper. Nijhawan said the key features that today stand out are its coffee shop — Rwanda coffee purveyor Land of a Thousand Hills Coffee — and Lucror's tenant lounge.
“If you go downstairs to the coffee shop, probably 70% of the patrons are college students,” Nijhawan said. “It brings a certain amount of energy and vibe to that space.”
Adding a pickleball court helped with leasing momentum at 5995 Windward Parkway, a 436K SF mid-rise office building in the affluent North Fulton County submarket, 25 miles north of Downtown Atlanta, Doyle said. Its owner, Grubb Properties, over the past year added the court and invested in features like an on-site fitness running trail, a farm-to-table café, a new lobby and a conference center. Colliers lured Global Payments into much of the building and it just signed another lease, bringing total occupancy to 98%.
“We were able to lease it up very quickly due to the amenities,” she said.
For 101 West Ponce, which also has space for an upscale restaurant, its location across the street from The Square, the historic city center of Downtown Decatur, offers an existing amenity base that will help lure tenants, Lamb said.
“I do think that you are able to achieve a premium in rent ... if you have stronger amenities,” she said.