MARTA Demand Driving Record-Breaking Rents
Atlanta may still be a car-loving city, but its companies are paying 25% more on average to locate near transit stations.
Office rents at spaces within a half-mile of a transit station are approaching $30/SF this year, nearly 25% higher than the average office rents throughout Metro Atlanta, a Cushman & Wakefield study found.
“Businesses — including major headquarters from companies such as Serta Simmons, NCR, WorldPay, Mercedes Benz, Anthem, State Farm, and Salesforce — are now seeing MARTA as an essential element of their site-selection decision,” Cushman & Wakefield officials said in the report.
The most recent company to stake ground near MARTA is Insight Global, which is expected to occupy the 205K SF Twelve24 office building in Central Periemter. That project will include a sky bridge that will connect directly to the Dunwoody MARTA station.
What has arguably been the strongest office submarket in the past few years has been Midtown, which has spawned a number of new office projects, all of which have been close to MARTA stations. That, in part, has helped office landlords in the submarket achieve some of the highest office rents in the metro area, an average of more than $35/SF. Some companies are even shelling out more than $40/SF in trophy office buildings, the first time those rents have been achieved in Atlanta, according to a recent Savills Studley report.
“Companies surveying the market from within are experiencing sticker shock,” Savills Studley officials wrote in the report. “Local businesses are paying record rent for Class-A properties in prime locations.”
Cushman & Wakefield Senior Director Chad Koenig said MARTA is not the only reason rents near stations are so high. They are also predominantly new construction, including MARTA's seven transit-oriented development projects in various stages of either planning or development. Any new construction will have market-high rates to cover the costs to build in today's market.
According to the report, 61% of new office developments are within walking distance of a MARTA station.
“MARTA's not the only answer, but it's a big reason for what companies are looking for,” Koenig said. “The whole idea of the MARTA market report was just to show [that] a much more mobile generation wants to use that as a means to get to work.”
Parkside Partners founding principal Kyle Jenks said net rents at Parkside's TOD projects are 15% higher than at its other properties; from the low $20/SF range for converted loft offices to the low $30/SF range for new construction, similar to what the firm did with Interface Inc.'s headquarters at 16th Station in Midtown.
“Our experience in these projects is that MARTA does play a significant role in our tenant's decision process,” he said.
MARTA's growing importance for companies has risen to a factor that makes it often surpass other desired amenities, Colliers International Senior Vice President Jodi Selvey recently told Bisnow. In part, companies are needing access to MARTA so they can pack more employees into office spaces, which has thrown parking ratios out of whack.
“Office tenants are being forced to get close to a MARTA station because there is simply not enough parking, that’s a fact," said Selvey, who recently brokered a lease for Insight Global. "MARTA has to be an option. Whether someone takes it, that’s a whole different story ... Adoption and office tenants wanting it are two very different things."
Koenig, though, said he expects MARTA's importance not only for companies, but ultimately for commuters will only increase in the coming years, especially as the metro area's population booms. That could also mean rents go even higher.
The 10-county Metro Atlanta region is expected to jump from more than 4.3 million people (tallied in 2015) to nearly 6 million people by 2040, according to the Atlanta Regional Commission.
“If we have another 2 million people move here, I think MARTA is going to continue to be something that a mobile workforce is going to want,” he said.