Atlanta's Cheap Office Stock, Talent Pool Have Made It A 'Goldilocks' For Back Offices
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One of its key back-office operations, more than 850 miles south of the bustling streets of Manhattan, is three stories, has views of pine trees and the nearest body of water is the small rambling creek called Rottenwood.
Welcome to the world of the corporate back office, where Atlanta is among the top destinations in the country.
First Data just inked a lease to expand operations at 1600 Terrell Mill Road — a 253K SF office building in Cobb County, just north of Downtown Atlanta — by 51K SF for a total of more than 100K SF at the Class-C office building.
The payment processing software giant's Atlanta office handles activities like credit checks and other call center activities, Avision Young principal Rick Nash said. Nash brokered the transaction for the landlord.
With competitive office rates and a vast sea of educated talent thanks to a sprawling university system, Metro Atlanta tends to be a cheaper alternative for back-office operations than other major cities, Cushman & Wakefield Executive Director Ken Ashley said.
“Atlanta offers a not-too-hot, not-too-cold situation,” Ashley said. "It's the Goldilocks of real estate."
New York City certainly has a vast pool of potential employee talent, but real estate costs make acquiring those heads expensive. At the same time, a place like Oklahoma City may have much lower-priced office space, but the reservoir of talent is not as deep, Ashley said.
“It's always easier to cut costs to help with profits than it is to sell more gear or services," he said. "So back offices are relatively low-hanging fruit."
The balance has given Metro Atlanta an attractive aura to corporate America, helping the city rank among the 10 focal points in the U.S. for back-office operations, Bridge Commercial Real Estate CEO Jeff Shaw said. Bridge is an office investment firm with a national footprint.
Atlanta's office market has been on a tear in the past year. More than 450K SF was absorbed by companies during the first quarter of this year, the best first-quarter performance in Metro Atlanta in three years, according to a recent Colliers International report. It has been so good, Ashley recently said, that the city's "real estate industry is pinching itself to see if this market is real.”
While major office deals like NCR Corp.'s new corporate headquarters and Anthem's new IT tower, both in Midtown, tend to grab the headlines, commercial real estate pros say the paper pushers — most often housed in cheaper suburban office buildings — are also seeing a surge in growth in Metro Atlanta.
“These kind of operations are so employee-driven,” Nash said. “The Northwest [corridor] has access to the employment base, and [First Data wasn't] seeing the kind of rents they were seeing in Cumberland or Midtown.”
The focus on attracting talent is just as key with corporate America for the rank-and-file departments as it is for the C-suite and technology departments, Nash said.
“It's all about talent. I think that's a huge component of what drives people to Atlanta and brings those operations here,” he said. “You got to have the right location. You want to be in a market like Atlanta, a market where you can tap into a big pool.”
Back-office deals were among some of the larger lease transactions during the first quarter as well, including Northside Hospital's 178K SF lease at 1001 Perimeter Summit, Delta Dental's 52K SF expansion at Sanctuary Park in Alpharetta and QBE North America's 37,500 SF renewal at 210 Interstate North in Cumberland/Galleria, according to Colliers International.
“Atlanta fits into our strategic footprint,” QBE North America Senior Vice President of Business Operations Charles Valinotti said in an email. “We have been in the market for years. We like the talent pool, and we wanted to establish a new space with our national standards.”
JLL Managing Director Jeff Bellamy said the North Fulton County office market is active with several back-office requirements ranging from 50K to 250K SF. And a market like North Fulton is appealing to companies conscious about the real estate and affiliated costs for an office. Plus, not every millennial can afford to live in Atlanta's urban centers.
“A lot of people can't afford to live in town, and the suburbs are a great alternative,” Bellamy said. “A lot of those people who work in back-office situations also don't want to pay to park. They want to have a short commute time, and a lot of those people live in the northern suburbs.”
“Boy, Atlanta for some reason, and I don't think I felt it 10 years ago, we're pretty much right at the top” for companies evaluating cities for back-office operations, CBRE Senior Vice President Bill Kilborn said. “The labor [factor] is huge. And the rental rate spread is not as significant as people think, at the end of the day, in the Atlanta tertiary markets compared to a Birmingham.”