Hines is forging ahead on the design of a second phase of its Atlantic Yards project in Midtown, a huge office complex that could be the first of a new generation of buildings in the next development cycle.
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The Houston-based developer is working on plans for The Forge at Atlantic Yards, a three-building, 637K SF office campus with ground-floor retail space, Hines Senior Managing Director John Heagy told Bisnow. The project is slated for the site of the Overtime Elite arena at the corner of 17th and Market streets on the south side of Atlantic Station.
The Forge would be a follow-up to Atlantic Yards, a two-building project that was developed on spec by Hines and Invesco but ended up being entirely leased to Microsoft. The 500K SF complex sold in 2022 to a subsidiary of KKR for $385M.
“We hit the jackpot at Atlantic Yards with Microsoft,” Heagy said. “We’d love it if lightning would strike twice.”
The Forge at Atlantic Yards would be the latest addition to the 138-acre Atlantic Station complex, the mini-city near Georgia Tech that is home to a collection of office towers, hotels, retail and residences.
Heagy said that unlike its predecessor, Hines won't likely break ground on The Forge without “a substantial amount of pre-leasing.” Overtime Elite is on a short-term ground lease with Hines for its facility and would be forced to relocate once the project kicks off.
But Hines is facing a number of headwinds to making The Forge a reality. Office demand has slowed as companies wrestle with how much space they need as hybrid work schedules become permanent. The technology sector, which drove the last wave of Midtown office development, has pulled back on its growth.
The need for pre-leasing is reflecting the reality of the office market, where bank lending has all but dried up for the asset class and leasing demand has slowed. Invesco, which was a financial partner with Hines on Atlantic Yards, isn't a partner on The Forge, Heagy said.
Hines plans to release more details on The Forge early next year, Heagy said.
“There’s no one specific industry we're going after. Clearly, the technology industry has slowed across the board,” he said. “But it doesn’t mean that that mode will last forever.”
More than 23% of the region’s offices are vacant, a record, according to CBRE. New leasing in Metro Atlanta shrank to 1.7M SF in the third quarter, down from 2M SF in the same period of 2022, Savills reported.
Hines also would need to capture top-of-the-market rents to justify construction. The per-SF cost to develop a new office building has skyrocketed from $400 a decade ago to $750 today, the Atlanta Business Chronicle reported.
While average Class-A office rent is a little more than $30 per SF, the Atlanta office market has proven that tenants wanting the newest, most amenity-intense spaces are willing to pay record rents for them. The second phase of The Interlock in West Midtown is asking $54 per SF, and the Garden Hills Office Building in Buckhead is commanding more than $55 per SF, according to Cushman & Wakefield.
Sage Software signed a lease in September for a record $70 per SF at Jamestown's new office building at Ponce City Market, the ABC reported.
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