A new wave of commercial real estate development is beginning to emerge in the South as cities such as Houston, Atlanta and Charleston shake off the construction slump triggered by a deep recession. In Houston's multifamily sector, for instance, new apartment supply this year is expected to double from 2011, according to brokerage firm Marcus & Millichap.
During a commercial finance and investment conference last Thursday at the Westin hotel in Atlanta, the topic of growth was front and center. The panel discussion — titled “Development: What? Where? By Whom?” — featured some of the biggest names in the commercial real estate business today. Produced by the law firm of Morris, Manning & Martin LLP and France Media's InterFace Conference Group, the daylong event attracted more than 400 leading investors, developers, lenders and financial intermediaries from across the Southeast.
The panel featured remarks from Jim Jacoby, chairman and CEO of Jacoby Development; Reid Freeman, president of Regent Partners; Charlie Tickle, chairman and CEO of Daniel Corp.; Chad Weaver, vice president of investments for Camden Development; Jay Jacobson, director of national acquisitions for Wood Partners; and moderator Michael McDonald, managing director of Eastdil Secured.
Panelists agreed that select development opportunities do exist, particularly in the multifamily sector, and indicate that activity at their companies is picking up.
“It’s a good time to be in the apartment business,” said Jacobson of Wood Partners, an Atlanta-based multifamily development company. “The equity is flooding into core product in infill locations in major gateways cities. The activity between Boston, New York, Washington, D.C., Seattle, San Francisco, Los Angeles and sometimes Houston is off the charts.”
Several of the panelists shared updates on recent projects, such as the Porsche headquarters project in Hapeville, Georgia. The new North American headquarters for Porsche, designed to showcase the Porsche brand, is expected to break ground next month, said Jacoby of Jacoby Development.
Porsche’s headquarters will help anchor Aerotropolis, a 130-acre mixed-use redevelopment of the former Ford Motor Co. assembly plant — a project Jacoby began in 2008. Porsche acquired more than 50 acres for the project in June and the facility is slated to open in 2013.
Project renderings show a mammoth facility topped by a green roof that slopes up and down around an atrium and central courtyard. The new center will consolidate the company's administration, technical, training and other operations. Jacoby added there are also plans for a test track. The facility will offer training and apprenticeships to area workers, and ultimately house 400 Porsche employees.
Jacoby is also the co-developer of Atlantic Station, a 600,000-square-foot mixed-use center on the northwestern edge of Midtown Atlanta. The popular development, located on the former site of the Atlantic Steel mill, opened in 2005.
Defying The Doubters
Jacoby said many commercial real estate professionals were doubtful the Atlantic Station project would work. The development was multi-faceted and the land was initially plagued by environmental problems and soil contamination. However, Jacoby said he was pleased with how the project unfolded. “It was beyond my dreams. We had a great team that came together and did it all — retail, office and some of the residential,” said Jacoby. “The new owners have a great trophy project.”
In early 2011, the retail component of Atlantic Station sold to a joint venture between North American Properties and CBRE Group. The partnership has rebranded the retail component to attract new retailers, and have brought in new stores such as American Eagle and White House/Black Market.
Jacoby added that the Atlantic Station development is characteristic of the type of projects his firm is interested in pursuing. “That's what we're interested in right now, these smart-growth, live-learn-work-play communities.”
Tickle of Daniel Corp., an Atlanta-based full-service real company, also discussed the development possibilities for Reynolds Plantation, an upscale golf community on Lake Oconee between Augusta and Atlanta. MetLife purchased the community in August and partnered with Daniel Corp. to oversee Reynolds Plantation, which includes about 2,700 single-family homes.
The site features six golf courses, four marinas and 5,000 acres of undeveloped land. The deal also included the Ritz-Carlton Lodge. Tickle described the deal as a 20- to 30-year play with the potential to create an additional 3,000 to 4,000 new home sites.
According to panelists, Charleston, S.C. has been another site of transformation, with major projects that include hotel and apartment development. Regent Partners and CC&T Real Estate have teamed up to build a 238-room hotel at Spring and King streets. Nearby, Charleston-based Greystar Real Estate Partners is building a 200-unit apartment project.
Freeman of Regent Partners, which has acquired and developed more than 10 million square feet of diverse product across the Southeast since its inception, said the company plans to build and sell the property. Freeman told panel moderator Michael McDonald, managing director of Eastdil Secured, “If all goes according [to plan], we expect a 24 percent ROI (return on investment).”
When asked which southern cities are poised for massive population growth, the panelists identified several cities in Texas — including Houston, Dallas and San Antonio. Coastal cities such as Miami and Charleston also are expected to boom.
Jacobson said the Panama Canal expansion project will also impact future growth in coastal cities. When the project is complete, possibly as early as 2014, much larger ships will be able to transit the famous shipping lane. “That is going to double, and in some cases triple, the cargo going through the Port of Houston and Port of Tampa,” said Jacobson, who added that he predicts a “mini-boom in infrastructure construction” to handle the growth.
— Liz Burlingame