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A mint of a sublease for State Farm has turned into a lemon.
Tempe, Arizona-based Carvana has terminated its whopping 570K SF sublease with State Farm at the insurance giant's Park Center Building 1 in Central Perimeter, the Atlanta Business Chronicle reported, citing anonymous sources. State Farm confirmed that it will begin marketing the space again for sublease at the 21-story, 607K SF tower overlooking Interstate 285 in the near future, The Atlanta Journal-Constitution reported.
The decision comes more than a year after the online used-car retailer inked a deal with the insurance giant to take over the newly constructed high-rise that was part of State Farm’s three-building office hub, a deal first reported by Bisnow. The arrangement was touted by Gov. Brian Kemp in February 2022 when it was officially announced, with Carvana announcing that it would hire an additional 3,500 workers in Metro Atlanta on top of the 1,500 it had at the time.
Carvana had been riding high on a pandemic boom in car-buying when supply chain issues complicated the delivery of new vehicles, pushing the prices sky-high. But what the pandemic gave Carvana, the reopening is taking away.
In the final quarter of 2022, Carvana's sales fell 23% and revenues dropped more than 24%, and the company lost some $7,400 on each vehicle it sold, according to The Street. Carvana posted a net loss of $1.59B, far surpassing any single-year loss in its history. The company has amassed $7B in debt, including real estate leases, according to The Street.
Carvana, which operates towering car vending machines throughout the country, including one in Midtown Atlanta, plans to cut $100M in costs this year.
State Farm built its campus next to the Dunwoody MARTA station over the past decade, but the shift to a hybrid work model during the pandemic pushed the company to seek other users to take the space. While it is now seeking a new tenant for Park Center 1, it sold Park Center 2 and 3, which combined span more than 1M SF, back to developer KDC in October.
The loss of Carvana is a blow to Atlanta’s office market, which is struggling through corporate footprint contractions despite strong fundamentals last year. As of the first quarter, Central Perimeter saw 112K SF of negative absorption, pushing its vacancy to over 21%, according to JLL.
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