Highwoods Mulling Residential Conversion Of 18-Story Office If State Government Vacates

The potential loss of a major Georgia state department from an 18-story office tower near Brookhaven has its owner searching for alternatives.

The Georgia Department of Revenue has occupied more than 250K SF at the 290K SF 1800 Century Blvd. office building for more than 20 years, but it is looking to drastically reduce its space or vacate entirely, landlord Highwoods Properties said in its first-quarter earnings report.

The potential loss of the tenant at the 48-year-old building is forcing Highwoods to evaluate “a number of long-term options with respect to the asset, including substantially renovating the asset as an office building, converting the asset for multifamily use and/or selling the asset,” Highwoods stated in the filing.

The Georgia State Properties Commission issued a request for leased space on April 13 for 97K SF of office space between the Georgia 400 and I-85 intersection and Pleasantdale Road and within 3 miles of an I-85 ramp, preferably in DeKalb County. The state tapped Savills Vice Chairman Erik Weiss and Managing Director Kari Downing to conduct the search for the Department of Revenue. 

The state is weighing candidates for the shortlist based on building improvements, the economics of a proposal, space planning and the ownership and management of any candidate building, according to the RFP. Submissions are due May 31 with a lease being awarded by July 20, according to the RFP.

During Highwoods’ earnings call April 26, CEO Ted Klinck said the Department of Revenue is “a big, big requirement, so I’m sure a lot of folks will be chasing it.”

“They’ve been in that building for a long time, over 20 years. And up until a couple of weeks ago, we thought it is a good chance for renewal,” Klinck said. “There’s a chance that we can keep them in that same building. There are other options in our portfolio that they may be interested in as well.”

The state's decision to shrink the department's revenue by 60% is in line with what is happening across the country as state and local governments — which occupied 22.6M SF of privately owned, corporate-grade office space nationwide in 2019, according to JLL — embrace hybrid work and slash their real estate footprints.

Office-to-residential conversions, like the one Highwoods is considering at 1800 Century Blvd., have been billed as a potential win-win solution to the problems of excess, obsolete office space and lack of housing supply. Some developers have expressed doubts about their viability, but more localities are offering funding to convince them to give it a try.