If you look up Peachtree Street, squint your eyes and let your mind wander, you could travel a boulevard of dreams.
Imagine a day trip aboard the $200 million Atlanta streetcar as it travels its 14.5-mile path up Peachtree.
You could leave your condo at Fox Plaza, just across from the famous theater, then stroll up the block for a facial at a 40-story spa-hotel. Now it’s time to hop on the streetcar and head for lunch at the Mandarin Oriental and a matinee performance at the new Atlanta Symphony Center.
You could round out your day shopping the luxurious Streets of Buckhead, dining at one of its signature restaurants, and snuggling in the Egyptian cotton sheets of the flagship Hilton Hotel in Buckhead.
But this is a Peachtree that does not yet exist. All these projects — buildings and streetscapes that would redefine the city and its most famous thoroughfare — have been stalled by the unforgiving reality of the downturn. Some have been abandoned by bank financiers, and others shelved by the city’s biggest developers. Some turned into nothing more than really cool blueprints. Others are moving along, but much more slowly than anticipated.
The impact is that some areas along Peachtree are vacant lots, others demolition sites shrouded with construction fencing.
For this story, The Atlanta Journal-Constitution interviewed developers of 18 landmark projects proposed on or near the Peachtree corridor, plus three in the suburbs. These projects — amounting to nearly $9 billion in development — would have driven millions of dollars in sales, hotel and motel taxes to local and state government.
“Nobody has seen an economy like the one we’ve got now,” said Atlanta developer Ben Carter.
Peachtree Street, from downtown to Buckhead, is home to 50 percent of all jobs in the city of Atlanta, 36 percent of the city’s retail space, 24 percent of the office space and more than $10 billion of appraised value for taxable properties.
That’s according to the Peachtree Corridor Task Force, the group working on the streetcar project.
Peachtree, in other words, is arguably the economic spine of Georgia.
But this isn’t the story of what has risen on Peachtree. This is the story of the city that hasn’t been built.
There are also many projects in the suburbs on hold pending an economic recovery — the International Village in Chamblee and an expansion of Riverwood in Cobb County to name just two.
To be sure, Atlanta has seen boom and bust cycles before — each decade has had a downturn that slowed the city’s growth. Real estate and optimism are embedded in Atlanta’s DNA, and many interviewed for this story are convinced the city’s economy is fundamentally vital and strong.
But this is a historic recession — one that affects nearly every sector of the economy and nearly all parts of the real estate community.
“There’s been no one left out,” said A.J. Robinson, president of Central Atlanta Progress and a former developer with Portman Properties. “It’s happening all over the country and in some places a lot worse.”
Steve Baile, senior vice president of Daniel Corp.’s Atlanta operations, agreed.
“This is probably the biggest adjustment I’ve seen in my 20 years in the business,” he said. He’s part of the development team at 12th & Midtown, a mega-complex that will cover a four-block area along Peachtree Street.
Atlanta has an exuberant real estate market that proposed more than 130 large projects since the beginning of this decade.
About half have been built.
Baile, who moved to Atlanta from Birmingham, said he noticed that developers are quick to announce projects here.
“I’d put it at about a 50-50 hit-miss ratio,” said Baile of how many projects get built.
He said developers could announce projects for several reasons. One is to build buzz, which can help get a project off the ground. Another is to “ward off competition,” he said.
Yet for nearly each project that didn’t get built in the past decade, there is another project that did. Examples include the King & Spalding headquarters at 1180 Peachtree St., Plaza Midtown, a condo complex with a Publix in the bottom that sold out before it was completed, Terminus 100, a tower in Buckhead filled with office tenants and restaurants. New big name hotels and residences also cropped up, like the St. Regis, the Mansion and three new W Hotels.
And don’t forget Atlantic Station, the mammoth mixed-use project with homes, condos, apartments, large and small retailers and restaurants, a hotel and office towers.
But the stack of unbuilt projects — a skyline unfulfilled — also leaves questions.
Did developers overbuild the condo, office, hotel and retail markets? And most important, when will the economy come back?
A look at key real estate metrics shows just how much developers may have overshot the mark.
● Office vacancy rates rose to 17.25 percent in the second quarter, according to Richard Bowers & Co. One industry metric — absorption — shows how much space was leased or vacated in a given time period. Richard Bowers & Co. said absorption was a negative 337,690 square feet in the second quarter, meaning businesses vacated more office space than they moved into.
● Metro Atlanta’s hotel occupancy is expected to average 52.7 percent this year, according to PKF-Hospitality, down from a historical average of 64.1 percent.
● The retail vacancy rate will rise to 12.6 percent for 2009 from 9.1 percent in 2008, projected Marcus & Millichap.
And, as demand has cooled, the number of unsold condos continues to grow. According to a first-quarter report published by Coldwell Banker NRT Development Advisors, there is a four-year supply of condos in the intown areas, Midtown, Atlantic Station and Virginia-Highland.
That same report shows close to 200 condos were sold intown in the first three months of 2009, but resale numbers were still down 33 percent. Some condo developers have been holding auctions to sell off their inventories.
“The ugly truth is that we don’t know what this thing is going to look like coming out the other end,” said Baile, who says that two phases of the $2 billion plus 12th & Midtown are on hold pending leases and financing. Phase I, a condo tower is finished, and phase II — two towers for a hotel and office — is coming out of the ground.
He predicted that projects proposed on the fringes of established markets will probably fall by the wayside.
“You have to have the right product, priced correctly in the right location,” said Baile. “We like being in the path of growth. We’re not going out there to create a new city center where there’s never been one before.”
Carter, developer of the Streets of Buckhead, believes the space will eventually get absorbed.
“We will get through this,” he said. “Those towers will fill, maybe not make as much money as people wanted to, but Atlanta will eventually absorb all that space.”
One project that could change dramatically based on the economy is Trump Tower, said developer Bennett Sands, director of Wood Partners.
“I think even if we had a giant pot of money, we wouldn’t start construction until a lot of the supply in Midtown had been absorbed,” he said. “It’s just not prudent to add condo inventory into that market right now. The start of that project is a long way off at this point.”
Cousins Properties said all future developments are on hold until market conditions improve. That effects Fox Plaza, a proposed 30-story condo tower near the Fox Theatre, where there’s now a vacant lot after Cousins demolished the existing building. And three more buildings at Terminus are stalled. Carter is proceeding with cautious optimism. He will restart construction on Phase I of his $1.5 billion luxury retail project in September with no hotels, though three were proposed. Plans for Starwood to build the first U.S. outpost of Baccarat are canceled, said Carter.
“The reason we didn’t go forward is because to make a luxury hotel work requires condos on top,” said Carter. “We decided it was not feasible.”
He also scrapped an office tower for the former Three Dollar Café site, a piece of land he decided not to buy and is still for sale.
Others projects, like the spa-hotel envisioned for the former Agatha’s Mystery Theater/Bridgetown Grill site will never get built. Freemont Realty Capital bought the lots in 2006. Within 12 months, plans for the spa-hotel were tabled.
“In most places, we got out with great returns, but we got caught in a few,” said Matt Reidy, managing director of Freemont Realty. “It happened very quickly.”
There could be a silver lining to the economic murk, however, said Central Atlanta Progress’ Robinson. He said Atlanta’s assets — including new condos, hotels, retail and office space — will have gotten cheaper to rent or buy. That in turn could attract new residents and businesses.
“Somebody is going to recognize that at some point and take advantage of it,” he said.
Reidy agreed: “Atlanta’s a very vibrant place. You still see job creation. It’s just a matter of time.”
Contributing to this story were staff writers Leon Stafford (lstafford@ajc.com), Michelle E. Shaw (mshaw@ajc.com), Gertha Coffee (gcoffee@ajc.com) and Dan Chapman (dchapman@ajc.com).
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