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As one trophy tower delivers, it is possible Buckhead's next gleaming trophy office tower could reach the sky by 2020.
Regent Partners' director of office properties and development Adam Allman is finally seeing rents in the submarket rise to levels that are justifying a new office tower. And with the backing of a recently installed new equity partner in Batson-Cook Development, the JV could attempt to break ground by next year on a $400M, 45-story office tower, topped by condominiums, along with a second, 300-unit multifamily high-rise on the site known as 3354 and 3356 Peachtree Road.
That site is a four-acre parcel behind Capital City Plaza that sits along the pedestrian bridge to MARTA's Buckhead station. Allman is among a panel of office heavy-hitters at Bisnow's Atlanta State of the Office event April 20, including Seven Oaks Co. CEO Bob Voyles and John Heagy, the senior managing director for Hines Interests in Atlanta.
The mix of for-sale residential atop office is the same approach Regent took with 3344 Peachtree back in 2008. The strategy worked for them: Regent sold the 50-story tower three years later, at more than 90% leased, to Parkway Properties for more than $160M.
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Allman said when Regent developed 3344 Peachtree, it cost the developer some $280/SF to build it. That translated into Regent netting rents from tenants in the low $30/SF range. But a confluence of events shaped to prevent a widespread spate of new office development in Atlanta during this cycle, despite the strong office fundamentals.
One key: construction costs, which have skyrocketed in the past few years. To build 3344 Peachtree today, Allman said the construction cost would be $400/SF. Developers began needing rents to exceed $40/SF in Atlanta to justify moving forward. That, Allman said, was a tall order.
Maybe not so much anymore. Regent's old project is already achieving more than $42/SF gross rents, according to a recent Colliers International report. And other trophy towers in Buckhead, such as Terminus 100 and 200 and Two Alliance are seeing rents in the high $30 to low to mid-$40/SF range, with Three Alliance seeing rents as high as $46/SF gross, according to the report.
“Rates have finally started growing to a point where they can meet construction pricing,” Allman said.
He declined to say if Regent would break ground on a completely spec basis next year. But Buckhead, he said, has a history of demonstrating that developers who do go spec eventually find success.
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