Metro Atlanta charities find real estate market a challenge

The paint is circa last decade and there are random carpet stains, but at $2.50 per square foot, it’s hard to beat the rent at the local nonprofit Senior Citizens Services of Atlanta.

And the charity's tenants feel good knowing their rent checks directly benefit Meals on Wheels and other services for the elderly.

However, just because rent is cheap (and feels good) doesn’t mean it’s easy to fill the vacant offices.

Like large office towers with Class A amenities that struggle to lure tenants, Atlanta’s biggest nonprofits are having the same nightmares.

“It was so bizarre because we hung in there for a long time during the downturn, and then it was like bam!” said Jeff Smythe, president and executive director of Senior Citizens Services. “People began moving out.”

In the course of a few months, he said, the nonprofit with a $2 million annual budget lost what amounted to $100,000 in annual rent from tenants.

Said Alan Kleeman, the group's board chairman: “In meals terms, that’s 13,000 more meals we could deliver if those dollars were in.”

It’s a story being played out across metro Atlanta.

  • The United Way of Metropolitan Atlanta, with a building downtown, has an unprecedented three empty floors to rent after losing tenants such as the nonprofit credit counseling service CredAbility.
  • Junior Achievement, with offices off Roswell Road in Sandy Springs, has about 7,000 square feet to rent after a startup firm moved out. It lost about $75,000 in annual rent revenue, which could provide 2,500 classes to students, executive director Jack Harris said.

Nonprofits appear to be another sector hit hard by the downturn in the real estate industry.

Though some nonprofits in search of space have parlayed the downturn into cheaper rent in better locations, others that own buildings have been burdened by high vacancy rates.

Metro Atlanta’s overall office vacancy rate was 21.2 percent at midyear, according to Cushman & Wakefield, a real estate services firm.

“These are just really difficult times,” said Frank Mann, a senior director with Cushman & Wakefield. He has assisted nonprofits as diverse as the Woodruff Arts Center, Metro YMCAs and the Georgia Tech Foundation with their real estate strategies.

“The biggest and best buildings are having trouble filling up. What makes you think a nonprofit would be able to do it?" Mann said. "It’s related to market conditions.”

He explained that it is an anomaly to be in such a “tenants market.”

Three to five years ago, nonprofits would have had no problem filling up their buildings, but they are facing a much more competitive environment today given all the empty space in Atlanta’s high-rises.

Smythe with Senior Citizen Services said dropping the price did help to fill several offices at the headquarters off Northside Drive in recent weeks.

But he is struggling to rent space vacated by a local theater. The nonprofit also rents its catering kitchen for $18.50 per hour or $145 per day.

And he still has several small offices -- of about 11 feet by 12 feet -- that rent for $300 a month, or $2.50 per square foot. They used to go for $350.

Chip Watson, a broker with CB Richard Ellis who represents the nonprofit for free, said the group is willing to work with potential tenants on improving space as needed, “but we hate to spend money with nobody in tow.”

He concedes the location is not for everyone -- “The challenge there is that you’re in a shared environment.”

Erin Steele, a spokeswoman for the United Way, said that nonprofit doesn’t have the cash to compete with commercial building owners on making improvements for new tenants.

It is unprecedented, she said, to have so much vacancy at 100 Edgewood Ave.

“We have about 84 percent occupancy. Before the recession, it was about 97 percent occupancy,” she said.

Of course, there are two sides of the coin for nonprofits.

“A couple of tenants recently left who were able to get really rock-bottom rents in other buildings,” Steele said.

One was CredAbility, formerly the Consumer Credit Counseling Service, which is moving into three floors at 270 Peachtree St. that had been leased by Southern Co. The nonprofit signed a 10-year lease.

“The current commercial real estate market offered a wide variety of competitive options that were not available in the recent past,” CredAbility spokesman John McCosh said.

Another is Goodwill, which has been expanding rapidly across North Georgia. Among other moves, the charity bought two closed Circuit City stores, taking advantage of vacant big-box stores.

And the Atlanta Lyric Opera, which used to rent space from Senior Citizen Services, found a permanent home at the Strand Theatre in Marietta.

The recession brought different woes to the Empty Stocking Fund, a nonprofit that raises money to distribute toys, clothing and school supplies to needy children.

The charity, which The Atlanta Journal-Constitution has been associated with since 1927, used about 30,000 square feet of space at City Hall East in central Atlanta to store articles for distribution over the winter holidays.

But Atlanta is selling the building to developers, leaving the nonprofit in search of a new home to house the toys it will distribute.

Don Crawford, executive director of the nonprofit, said he has rented space for this year but is still searching for a permanent solution.

“We’ve got a Band-Aid right now,” he said, calling his new lease a “favor.” He’s paying less than $1 per square foot for warehouse space in Chamblee.

“But it’s not something they can commit to at that price for the long term. They are doing it short-term because like everyone else in the down market, they’re having trouble leasing their real estate.”

He said he’s working on a long-term solution. A donated piece of property or warehouse would be ideal, he said.

One business tenant at the Senior Citizen Services building thinks she got a great deal on her lease, and she enjoys the setting.

Dondra Hedden is the national sales director for Tasmanian Rain, an imported brand of water that launched in the United States less than two years ago. The company recently made Atlanta its U.S. base, and she has been renting an office in the building for about a year.

She compared her rent -- about $325 a month -- with the $600 to $1,200 that she was quoted in other office settings.

“It was very economical for us,” she said, explaining the seniors there add to her enjoyment.

“Quite honestly, I think it’s brilliant that nonprofits even open their doors to independent businesses to offset their costs,” she said.

“It made me want to be there because I felt more comfortable knowing the rent goes to the nonprofit," Hedden said. "We’re not crazy about the color of the walls or cabinets, but it’s functional and we love it. If I’m having a bad day, seeing the seniors makes me more cheerful and I say, ‘My life is not that bad.’ ”