After plowing well over $100 million into rehabbing and repairing the 2 Peachtree Building over the years, the state is hoping to sell the 41-story giant a few steps from the Five Points MARTA station.
The Georgia Building Authority board, headed by Gov. Nathan Deal, is scheduled to vote Wednesday whether to sell the home of about 3,000 state employees. Eventually, the state would like to move employees out of the building, although that may take several years.
George Hooks, who was chairman of the state Senate Appropriations Committee in the 1990s and early 2000s when it was regularly asked for millions to fix the nearly 50-year-old building, called it a smart move.
“I’m glad they are selling it,” Hooks said. “It was given to the state. … And then we had to maintain it and fix it up, and it’s just been a money pit. Budget after budget, we had to put more and more into 2 Peachtree.”
Among those who regularly complained about spending on the building was Steven Stancil, now head of the Georgia Building Authority but then a state lawmaker from Cherokee County.
Stancil said, “We don’t know what we’ll get” for the building.
But his office started looking into selling the tower after getting an unsolicited offer. The buyer wanted the state to guarantee to lease space for 20 more years, something officials didn’t want to do.
Repair costs more than doubled
Now might be a good time to sell, amid rising real estate values, steady job growth and a return of many companies to the urban core and nearby transit, observers say.
When it opened in 1967, the former First Atlanta Tower at Five Points was called the South’s tallest office tower. Besides the bank, it was home to law firms and financial services business.
The Robert W. Woodruff Foundation donated it to the state in 1992 in a move intended to keep workers downtown at a time when companies were fleeing the business district.
The state initially estimated it would cost $50 million to make repairs, and that it would take five or six years to complete. But removal of asbestos from the building and other costs pushed the tab past $115 million, and upgrades and renovations bled into a second decade.
More than a decade after the state took over the building, The Atlanta Journal-Constitution was reporting on problematic elevators and loose facade at 2 Peachtree.
Workers for the massive Departments of Community Health and Human Resources — agencies that administer public health care and social service programs for more than 2 million Georgians, have helped fill the building for years.
The plan is to eventually move state employees into other buildings, but that’s a long-term process.
Some of the employees may move into locations across from the state Capitol, but that wouldn't happen until the state demolishes the former state archives building, replaces it with a new courts building and rehabs the existing court facilities for employees from other agencies. Lawmakers haven't even agreed yet to put up the money to raze the archives building, let alone provide the more than $100 million needed to build the new court building. Deal is expected to seek that funding before he leaves office in 2019.
Either way, the process will take years, so if 2 Peachtree is sold, the new buyer will have renters already in place, at least for a while.
A revival in office market
The office market is recovering from the depths of the Great Recession, which left Atlanta with empty new office towers and a glut of vacant space. Landlords cut deals with tenants to fill holes in their buildings as companies downsized, cutting jobs by the thousands.
Several years of steady job creation and limited new construction since has put a pinch on available space throughout metro Atlanta. The metro office vacancy rate stands at a 14-year low and is sending rents soaring to all-time highs, according to data from CBRE Research.
But downtown Atlanta has been a laggard, with a vacancy rate hovering at 22 percent and landlords there offering some of the cheapest rents among Atlanta’s top office submarkets.
Still, downtown could be primed for a lift as Midtown and Buckhead fill up and tenants seeking space in offices near transit take second or third looks at the city's core. The planned redevelopment of Underground Atlanta with residences, refreshed retailers and a grocery store is another potential boon for the building.
The state tower stands near the central hub of MARTA at a time when corporations have increasingly cited transit as a major factor in their relocation decisions. But the tower is also older and doesn’t offer the luxury finishes and amenities, such as high-end restaurants, that many corporate users might demand.
It could be a viable option for other governmental or nonprofit organizations or perhaps Georgia State University, which has acquired a number of downtown buildings and once made a run at acquiring downtown’s Equitable Building.
‘Building is incredibly located’
A.J. Robinson, the president and CEO of Central Atlanta Progress and the Atlanta Downtown Improvement District, called the building a good potential investment.
“Downtown has a lot of small- to medium-size businesses that occupy a lot of our office product, and there’s people who need to be near government and others that need to be near Georgia State,” he said. We’ve also got this whole new infusion of young technology companies who are looking for space, and they tend to go into in unconventional spaces.”
Another example, he said, is the revitalized Flatiron Building, which has been rebranded as the tech hub Flatiron City and will be home to startups and a Microsoft Innovation Center.
He said 2 Peachtree can also overcome some of its perceived lack of amenities by its location near dozens of restaurants and downtown gyms.
“That building is incredibly located,” he said. “That is the original (transit-oriented development), right on a MARTA station.”
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