Office Redevelopments, Leasing Key to Downtown Atlanta’s Re-emergence
The vitality of Downtown Atlanta is exciting. In response to a wave of revitalization efforts and substantial investment from corporations, universities and the public sector, the submarket’s fundamentals are rapidly strengthening.
As tenants have reprioritized their desires for office locations to include access to public transportation, walkable retail and proximity to cultural attractions and an educated workforce, Downtown has gained tremendous traction in demand and re-emerged as an affordable and authentic urban work setting.
Model Project: 100 Peachtree
While new development activity is primarily focused on housing, much of the bustle in Downtown Atlanta’s office market is focused on redevelopment, renovations and repositioning.
For instance, our team is transforming 100 Peachtree, a 32-story office tower, into a modern, transportation-oriented workplace destination with upgraded amenities, enhanced connectivity with Woodruff Park and new community activations. 100 Peachtree’s timeless Meisian design functionality provides a workplace for tenants ranging from traditional corporate headquarters to tech startups.
Changes at 100 Peachtree reflect a broader story about shifting expectations for workplace environments. Employees increasingly desire to work at a “go-to” office building with access to transit in an amenity-rich setting. Office amenities have evolved from providing convenience like a café or sundry shop to blurring the lines of work and life where spouses can meet office workers for dinner and a game at venues like State Farm Arena (formerly Philips Arena) or the newly opened Mercedes-Benz Stadium.
There is a new “stickiness” to Downtown where employees don’t just come into the area for work, they arrive early for a workout and coffee, and stay late for the live music series at the park.
To meet this demand, owners are investing both capital and personnel into buildings, and we’re seeing new features such as food halls, outdoor gathering spaces, public art and community events at office assets in the Downtown submarket. Building improvements and enhanced programming, combined with a location where major highways and MARTA rail lines converge, provides the ideal environment for employers to attract and retain a talented workforce.
Leasing activity at 100 Peachtree also reflects Downtown’s momentum. The Boston Consulting Firm, which already occupied two full floors at the tower, recently increased its footprint by signing a 19,000-square-foot lease expansion. CallRail also announced its plan to expand at 100 Peachtree, where it will add another 300 jobs over the next five years. Finally, Georgia’s Own Credit Union relocated its headquarters to 100 Peachtree last year, bringing the Atlanta-based company back to its Downtown roots.
Occupancy, Rents Increasing
Downtown’s office sector closed strong in the second quarter, reaching 149,595 square feet of positive absorption, according to JLL. The submarket has been on a winning streak over the past two years. Since the second quarter of 2016, absorption for the Downtown submarket has reached 676,036 square feet, comprising 34.4 percent of the total net absorption for the entire metro. This is impressive, considering there has been very little new inventory added to the submarket during that time.
Since the second quarter of 2016, direct vacancy has dropped 370 basis points in the Downtown office submarket, while the overall metro has increased 90 basis points over the same period. Asking rents have followed suit, with rates increasing 14.4 percent since the beginning of 2016.
Class A and B rates both reached historic highs in early 2018. As demand continues to outpace supply in the Downtown submarket, rates are expected to continue to rise.
Operations Are Key
To continue the momentum in 2019 and beyond, both the public and private sectors must look for opportunities to curate a holistic and connected community experience in Downtown Atlanta that resonates with top talent, from Gen Z to baby boomers. A hospitality-driven approach focused on amenities and services that promote social interactions and activities provides tremendous value to tenants; in turn, this adds value to assets and the greater Downtown environment.
One of the ways we implemented this strategy at 100 Peachtree was by hiring a community engagement manager focused on facilitating event programming, tenant activities and partnerships with community organizations. We’ve also launched a spec suite program at 100 Peachtree, branded “Spur,” that will challenge the real estate community to rethink what modern office space should look like for today’s users. We’ve empowered four design teams with complete artistic freedom to transform four suites into workspaces that push tenants to the next level of creativity and productivity.
Finally, consider the importance of digital connectivity. Owners and property managers must provide workspaces that not only meet the physical needs of tenants, but also their ever-growing digital needs. 100 Peachtree recently earned Silver Wired Certification on the basis of advanced digital infrastructure, resiliency and readiness to adopt future technology. Digital connectivity is a powerful point of difference for office buildings. As more TAMI (tech, advertising, media, information) tenants, choose to expand in Downtown Atlanta, wired certification will ensure office buildings are on the forefront of trends in technology and future-readiness.
Looking ahead, several high-profile projects continue to garner attention from potential Downtown office tenants (including Amazon’s HQ2) and investors, such as the redevelopment of South Downtown, The Gulch and Underground Atlanta. With exciting proposals moving closer to reality, Downtown Atlanta is just beginning to unveil its potential. The submarket’s influx of commerce and reinvestment in community are the cornerstones for its future.
— By Mark Vollbrecht, Principal, Zeller Realty Group. This article originally appeared in the October 2018 issue of Southeast Real Estate Business.