Cranes in Buckhead and Midtown hover over skyscrapers designed for millenials who want to live in the thumping heart of a major city.
In Roswell and Doraville, developers have big new plans for sites whose high potential was dashed by the cold grip of the financial crisis.
A crescent of rail bed that cuts through historic neighborhoods west of downtown Atlanta is primed to become a segment of the Beltline, which backers say could trigger resurgence for forgotten neighborhoods.
Metro Atlanta took a harder hit than many regions during the recession, largely because of its reliance on development. Now, the resurgence of building and plan-pitching is a promising sign that metro Atlanta’s uneven recovery is becoming strong enough for developers, investors and lenders to put billions on the line.
In contrast to the last decade’s boom, when speculative real estate development ruled metro Atlanta, projects coming out of the ground today reflect real demand, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.
“Construction for the sake of construction is now over,” he said. “At this point everybody wants to be dead sure before they start a project that the demand is there.”
Commercial development is a key cog in the region’s economy. Commercial projects such as office towers and retail centers diversify the property tax base, which was kneecapped during the recession. And greater density typically means greater property values.
Commercial development is also a jobs engine.
The recession cut construction jobs in metro Atlanta nearly in half, to 84,000 by 2011, but the number had rebounded to 98,000 this summer, according to government figures.
Dhawan said real estate is a trailing indicator of economic health, with actual demand driving the cycle. That was a lesson not followed last decade when building boomed despite tepid job growth.
That’s not to say metro Atlanta couldn’t be left overbuilt again when the economy inevitably switches from expansion to recession, Dhawan said.
The region has reclaimed nearly all the jobs it lost during the recession, but there are still concerns. Metro unemployment remains higher than the national average. Younger people aren’t starting families and buying homes like prior generations did. One recent survey found the region has fallen out of favor among educated young professionals.
But this development cycle is more stable, in part because of stricter lending, Dhawan said.
Big-ticket projects
Two stadiums totaling about $2 billion in value and thousands of luxury high-rise and mid-rise apartment units are under construction in in-town neighborhoods alone, causing some angst that there could be a bubble in luxury rentals.
Though still lower than pre-recession levels, this is 16 million square feet of industrial and distribution projects in planning, according to a report from commercial brokerage Marcus & Millichap.
Retail and office space have lagged.
The first major speculative office tower — meaning it is being built without a signed tenant — is underway near Phipps Plaza in Buckhead. The last cycle had spec several towers in Buckhead alone that opened their doors just as corporations cut jobs and spending.
It comes as metro office vacancy, at 14.3 percent, is at its lowest point since peaking at 17.4 percent in 2010, according to research firm CoStar Group.
Demand for top-tier office space in metro Atlanta’s central business district is “beginning to outpace supply,” according to a report from real estate research firm Cushman & Wakefield.
A surge of new investment by one of Atlanta’s notable real estate firms, Cousins Properties, has followed improvements in the metro jobs market. After shifting some of its focus to high-growth markets such as Dallas and Houston, Cousins recently acquired the existing three-tower Northpark Town Center office development for $348 million in Sandy Springs.
But Cousins also is scouting land in Buckhead for future office towers in this economic cycle or to hold for the next, Cousins Properties CEO Larry Gellerstedt said. And it’s part of a joint-venture contemplating a mixed-use project at the junction of Ga. 400 and Abernathy Road.
The company also is finishing the second phase of its Emory Point mixed-use project and readying plans for a third phase. Cousins has a separate $65 million, 350-unit apartment project in downtown Decatur in the works.
In a recent speech to the Atlanta Regional Commission, Atlanta Mayor Kasim Reed said higher-density development not just in his city but across the metro area will help attract young people and boomers who are flocking to walkable communities.
Though some are concerned the lack of a regional transportation strategy is a hindrance, Reed rattled off projects from Alpharetta to South Fulton to the Beltline that are bringing urban connectivity to once car-centric neighborhoods.
“It’s going to change the way we live,” he said, calling for action on transportation.
In an interview Monday, Reed said the city has seen building permit activity valued at $2.1 billion so far this year, up from $400 million a year ago. A huge chunk of that is the new Falcons stadium, slated to open in 2017.
Beltline investment
On Wednesday, the Beltline broke ground on a three-mile western leg through neighborhoods hard hit by recession. The $43 million expansion — paid by public and private funds — is one of the largest investments in neighborhoods such as West End since MARTA rail.
The Beltline has helped generate more than $1 billion in private development on its eastern corridor, and Reed said he expects the project to bring new rental housing, retail and other amenities.
“We’ve been on a bit of a roll,” the mayor said.
The awakening development interest has given the city hope about unloading some troubled properties. The city is marketing Underground Atlanta, the civic center and Turner Field, just to name a few. The idea is to shed money-losing properties to help fund a future infrastructure bond program and recruit new investment to boost the tax base.
In Midtown, longtime Atlanta homebuilder John Wieland announced One Museum Place, one of the first luxury condo projects in Atlanta since the crisis. It’ll rise across from Woodruff Arts Center in on Peachtree Street in a Midtown market dominated of late by high-rise apartments.
Wieland said he scaled back his plans from 96 units to 45. Instead of buildings rising 16 and 20 stories, respectively, he plans two five-story buildings. Prices will range from $900,000 to more than $3 million.
A recent luncheon to launch the project attracted 55 business leaders and would-be buyers, Wieland said, and a reception for real estate agents attracted about 120.
Little condo development has occurred since the region was left with a glut of for sale units planned in headier days.
“We talked to a lot of (lenders) who said: ‘You want to do luxury condos in Atlanta, Georgia. Have you thought about apartments?’ ” Wieland said.
But Wieland said there is demand again for the first time in years from affluent buyers who want to live in the city.
“We feel like the wind is very much at our back,” he said.
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