It wasn’t so long ago that Atlanta’s swankiest address was under attack.
News media were piling on about several empty new office towers. Seven-figure condos sat vacant. And construction of a mixed-use project so grand it was billed as the Rodeo Drive of the South had ground to a halt.
A civic group bought full-page color ads in the Wall Street Journal imploring folks to take advantage of the district’s overbuilding pain.
“But hurry,” one ad said, “opportunity doesn’t knock twice.”
That was September 2009. Today those ads look prescient.
A community so hard up for home buyers and office tenants that it hocked southern luxury at rock bottom prices is building again.
But the rebound has a different tone, one that's a little less exclusive. Instead of glitzy new office buildings, luxury condos and retailers for the 1 percent, the strength of the market now lies in high-end apartments catering to millennials and older folks who rent by choice. Retail space is going to merchants with a tad more mass appeal.
Office vacancy in Buckhead — 16.6 percent at the end of 2012 — is still a few percentage points high by historical standards. But that’s far better than the peak of 23 percent in early 2010, according to data from real estate services firm CoStar Group.
The decline has come despite more than 2 million square feet of new top tier space added to the market when four largely empty towers opened in 2009-2010. Those buildings are filling up.
And New York developer Tishman Speyer is said to be quietly pitching land for a new office tower not far from Phipps Plaza. It would be the first office skyscraper started in nearly five years.
Sam Massell, a former Atlanta mayor and president of the Buckhead Coalition, the civic group that bought the pricey national ads, said the world needed to know that Buckhead would quickly rebound from the recession.
“We were telling the world, ‘Yes, we have space that’s vacant, but we’ll have the supply when the demand came back,’” Massell said. “And it did.”
The stalled Streets of Buckhead mixed-use project at Peachtree and East Paces Ferry roads – the one compared to Rodeo Drive before it became arguably metro Atlanta’s most visible development misfire – is being reborn as Buckhead Atlanta.
Five construction cranes frozen in place there for what seemed like ages are hoisting steel again. Portions of a parking structure are visible above construction barricades.
The project is still ambitious, but the luxury hotels and hundreds of condos originally planned there several years ago have been replaced by 370 high-rise apartments across two towers. The retail and office offerings will be smaller.
Hermes, an international retailer that opened there a few years ago, will have anchor space along Bolling Way. But little else is known about what merchants, restaurants and other attractions California development firm OliverMcMillan, which took over the stalled project in 2011, plans to place there.
Hunter Richardson, who heads the project for Oliver McMillan, said at a recent meeting of the Commercial Real Estate Women of Atlanta that the project will include $330 million in new investment on top of $360 million already spent at the 10-acre site.
Richardson said the firm set out to “tweak” the project started by Atlanta developer Ben Carter.
Ultimately, he said, “we’ve redesigned the architecture top to bottom.”
The company has said the project will scale back the height, capping the apartment towers at 20 stories, with intimate avenues and energy on the street.
The Buckhead Coalition said more than 4,100 apartment units were announced for development in 2012, which equates to nearly 20 percent of the district’s 21,000 existing units.
Cousins Properties, the Atlanta-based developer of Terminus at Peachtree and Piedmont roads, recently sold three parcels at the site to Charlotte-based Crescent Resources, which has started construction of three eight-story apartment buildings.
Demographics are part of the changes in many long-dreamed of projects, but there are other factors.
“The tweaking you see going on, whether it’s condos going to apartments or the scale (of projects) going down a little is clearly a reflection of an economy that is growing at a much slower rate than it was five or seven years ago,” said Cousins Properties President and CEO Larry Gellerstedt. “People are tempering that optimism.”
Cousins planned residential on those parcels – and many expected the site to be another condos – but Gellerstedt said the market conditions demanded apartments and not for-sale units.
Cousins is not an apartment developer, he said, and sought a developer with experience with the product who could complete the 10-acre mixed-use center.
“Supply and demand is a formula we operate,” Massell said when asked about the switch from condos to rentals. Young people prefer to rent, he said, and want to live close to where they work and play, and older residents who might normally buy are renting by choice.
Benjamin Collins, southeast vice president for Crescent Resources, said millenials are more social and want the convenience of renting and the flexibility to pick up and follow jobs and live near their workplaces.
Buckhead has 80,000 jobs in the immediate vicinity, he said, but it needs workforce housing positions are being absorbed by men and women aged 22 to 30. These new workers make solid wages, he said, but can’t afford to purchase a home within a short walk or drive.
Collins scoffed at suggestions that apartment development is experiencing a bubble, saying that the number of Americans entering the prime years of renting is the largest it’s been since the Baby Boomer generation.
Developers and investors like Cousins remain bullish on the area, Gellerstedt said. At Terminus, the Atlanta real estate investment trust recently engineered a deal to take control of the project’s office towers in a joint venture with unit of Wall Street investment firm Morgan Stanley.
“Really, we wouldn’t have done that venture if we weren’t a long term believer in Buckhead,” Gellerstedt said.
JPMorgan Chase is the lender behind the Crescent apartment buildings and big real estate players like Parkway and Highwoods have made significant recent investments in Buckhead office buildings.
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