Atlanta's Top 10 Real Estate Stories Of 2017
Atlanta burned hot and bright for quite a few real estate sectors, along with a portion of the city's major interstate. New projects transformed the skyline, solidified the metro area's status as a major e-commerce distribution hub and are positioning Downtown Atlanta for a renaissance. Here are the biggest commercial real estate stories in Atlanta this past year.
10. The Connector Fire
An Atlanta traffic nightmare was realized March 30. On that day, a fire, ignited by a homeless man, was responsible for causing an elevated portion of Interstate 85 northbound to collapse and severely damaging a section of the southbound lane. The net result was commuters unable to use a critical artery that connects the city — with more than 70M SF of office space — to the northern Atlanta suburbs.
That stretch of highway is used by an average of 222,000 vehicles a day, according to the Georgia Department of Transportation. A traffic nightmare ensued.
In the aftermath, many businesses near the affected highway suffered from reduced customer traffic. On the plus side, Atlanta's main transit system, MARTA, saw a boost in ridership as typically car-strapped commuters took alternative modes of transit. After 54,000 work hours, contractors managed to repair and reopen the highway by June.
That boost to MARTA's ridership did not last after the repairs. The man accused of causing the fire, Basil Eleby, may have arson charges dropped against him if he completes an 18-month mental health treatment program, the Atlanta Journal-Constitution reports.
9. Multifamily Continues Its Momentum
Developers continued to make bets on the demand for apartment living in Atlanta. According to Haddow & Co., there are more than 10,000 apartment units underway as of the third quarter and nearly an equal number in the planning stages. But as the rate of rent growth has cooled down inside the city limits, which has seen the majority of new apartments, developers and investors have been turning their eyes toward Metro Atlanta's suburbs, where rent growth has been noticeably stronger in 2017 and new development has been limited.
The apartment market has also fueled a strong tide of investment sales. Mulltifamily investors, both foreign and domestic, have flocked from gateway markets like California and New York, according to a recent Marcus & Millichap study.
The average price per unit for apartments built after 2000 were around $200K/unit, according to Marcus & Millichap.
8. Industrial Booms
To say Metro Atlanta's industrial market performed well in 2017 would be a gross understatement.
Landlords could potentially having the best single year of absorption in the city's history — beating out 2014's record of 22.6M SF, according to a recent Colliers International report. With numbers like that, Atlanta could exceed every other major industrial market in the U.S. for the year.
And while a plethora of new industrial developments delivered this year, many of them started without any tenants pre-leasing the space, supply and demand have appeared to have remained in balance. More than 90% of the space occupied in the third quarter were with buildings developed during the year, according to Colliers.
“The desire for modern warehouse, along with continued strength and growth of e-commerce activity, remain the driving factors producing the sustained demand,” Colliers officials said, adding that another 20M SF of potential deals were still scouting the Atlanta market.
7. Co-working Continues To Blossom
Local operators have made a splash as well, including Tech Square Labs and, most recently, Constellations, a shared workspace facility along the Atlanta Streetcar route in the Sweet Auburn historic district being developed by Gene Kansas Real Estate.
Serendipity Labs also entered the Atlanta fray with its first location in Buckhead, and plans for more, while Industrious made its first foray into Atlanta's office suburbs. More than 1.2M SF in Atlanta is now being used as co-working space, according to Colliers International.
6. Phipps Plaza Getting A Makeover
The mall operator, which also owns Atlanta's other successful mall, Lenox Square, will raze the Belk wing and in its place develop a 250K SF office building, a three-story Life Time Athletic facility and a Nobu-branded hotel.
The total cost of the project will exceed $200M and will deliver in 2020.
5. The BeltLine And Affordability
The Atlanta BeltLine — the 22-mile stretch of pedestrian trails that runs through prominent Atlanta neighborhoods — has become the closest thing in the metro area to the High Line in New York. Developers have clamored for properties along the path, building apartments, retail and office spaces to fuel demand for intown living. The boom has led to criticisms that average workers are getting priced out of housing in these neighborhoods.
With more than $5B of development and redevelopment projects underway in the city, Atlanta Mayor Kasim Reed recently called for developers to focus on providing more affordable housing options going forward during a recent Bisnow event.
Over the summer, The Atlanta BeltLine Inc. entered into an agreement with the Atlanta Housing Authority to leverage resources in both agencies to boost affordable housing by 5,600 units along the path in future projects.
4. Integral vs. Atlanta
The ongoing dispute between a prominent Atlanta developer and Mayor Kasim Reed continued to grab headlines throughout the year. It began earlier this year when the Atlanta Housing Authority sued to scrap a 2011 agreement between the agency under different leadership and The Integral Group to allow the developer to buy up city-owned parcels at values alleged to be below current market prices.
At the time, Reed called the deal “unlawful” and “unethical,” and it would allow Integral to make “a windfall profit at the expense of Atlanta's low-income families,” the Atlanta Journal-Constitution reported.
Integral CEO Egbert Perry fired back in court filings, claiming that senior members of Reed's administration told him in a 2014 meeting that if the city did not get the rights to a piece of property held by Integral, it would “make it difficult, if not impossible, for you to do business in the City of Atlanta,” according to the AJC.
Perry also defended the arrangement for the 79 undeveloped acres in a statement to Bisnow.
"All of the 'windfall,' as such term is characterized by the AJC and parroted by Reed, is shared equally between the AHA and the developers, with Integral being one of three private development partners."
Integral also said new projects would still involve affordable housing units.
"After these last few phases of development are executed as planned, the sites will still contain greater than 50% affordability," Integral officials said. "These later phases increase the disposable income on-site in order to attract and support desirable retailers and other uses that create a more economically sustainable community."
3. Anthem Proves Midtown's Mojo
It is the deal that came out of nowhere. Nonetheless, it solidified Midtown's claims to being Atlanta's business behemoth. Anthem Inc. secured a deal with Portman Holdings to occupy all of a 21-story office project at the corner of Fourth and West Peachtree streets for its IT operations. The 352K SF project is being named Anthem Technology Center and sits across from Portman's other banner project, the Coda high-tech tower.
Continued leasing strength in Midtown has Class-A office landlords quoting average rental rates more than Buckhead for the first time ever, at $50/SF, according to Colliers International.
“Midtown is expected to remain the top office submarket overall in Atlanta and will absorb the highest amount of office space in 2017,” Colliers officials said.
2. Fraud Allegations Dog Colliers Atlanta
But the name was everywhere in the local real estate industry this fall when the Houston-based retailer filed suit against Colliers International's Atlanta former Senior Vice President Alexander Deitch, along with former in-house real estate executives and a handful of developers, for arranging a multistate fraud scheme in which the group allegedly steered the retailer to take leases at some locations that were charging rents higher than the average in the market.
Mattress Firm also accused the trio of owning some of those retail locations through shell companies and accepting bribes and kickbacks from developers for favorable Mattress Firm deals. The defendants have denied those accusations in press reports.
Colliers Atlanta fired Deitch after Mattress Firm filed a lawsuit, which also names Colliers Atlanta as a defendant and accuses the local division of negligence.
1. The Gulch, HQ2 And Downtown's Resurgence
Los Angeles-based CIM Group is the latest to offer up a vision for one of Atlanta's biggest barren spots, the 27-acre Gulch site in Downtown Atlanta.
Bisnow first reported in November that an unknown party filed permits with the City of Atlanta to redevelop the site with a staggering amount of commercial real estate: more than 9M SF of office, 1M SF of commercial, 2,100 apartment units and 1,500 hotel rooms.
Later reports revealed CIM to be the developer. Many expect the project is being teed up for the potential Amazon HQ2 project. The online retail giant has yet to announce a list of finalists for the $5B project, but many expect Atlanta to be among the contenders. Georgia's pitch to Amazon included a handful of properties that would fit the retailer's requirements, the Gulch among them.
But the huge project is the tip of the iceberg for Downtown Atlanta.
A number of developers are positioning themselves for what could be a new renaissance for the area, from Carter and its partners redeveloping the former Turner Field into a stadium for Georgia State University, along with mixed-use developments around it geared toward the student population, to WRS' April purchase of Underground Atlanta with plans to redevelop the popular site with a mix of retail and student housing, to Newport US RE's acquisition of key, historic downtown buildings just south of the Five Points MARTA station to create a $200M revitalization with a mix of retail, restaurants, art galleries, office spaces and apartments.