Atlanta Business Chronicle
by Matt Hennie
The look of Atlanta’s skyline in the coming years will be shaped in large part by today’s recession.
Though the down economy could translate into a dip in real estate prices, making it cheaper for a developer to buy property, the stagnated credit markets mean that projects won’t get funded anytime soon. And as financial markets improve, developers may face steep preleasing requirements that impact the size and scope of their buildings.
In short, don’t expect any new projects to rival 3344 Peachtree, the 50-story, mixed-use development that is the tallest building in Buckhead.
“When will we see the next 50-story building in Buckhead? I would guess that if we see another 50-story building there in the next 10 years, I would be surprised,” said Clark Gore, market director of Jones Lang LaSalle Inc. “The skyline is impacted by where we are in the recovery.”
Several projects in Buckhead will alter the skyline in the coming months, including Tishman Speyer’s Two Alliance Center, Terminus 200 from Cousins Properties Inc. and 3630 Peachtree, a joint venture between Pope & Land Enterprises Inc., Duke Realty Corp., Post Properties Inc. and Novare Group Inc.
But the recession is slowing projects that will dot the city’s skyline in the coming years, including a 45-story office tower at Allen Plaza — the nearly $2 billion mixed-use development over nine blocks on the northern edge of downtown Atlanta at West Peachtree, Williams and Spring streets. Two announced additions to the four buildings already at the site are on hold pending improvements in the financial markets and increased interest from potential tenants, said Hal Barry, chairman of Barry Real Estate Companies Inc., which is developing Allen Plaza.
“We are always ready to make deals, but you have to understand what is going on with the economy and the banking crisis. It has us all standing still,” Barry said.
Barry said he would like to move forward within 12 months on one of two additional class A office towers planned for the site — the 28-story 24 Allen Plaza with 395,379 square feet or the 45-story 50 Allen Plaza with 800,000 square feet. But that hinges on striking the right balance of financing and tenants.
“We don’t throw up a spec building we hope we can lease. We are working on substantial prelease candidates now. Who knows when we will pull them together?” he said.
The economic downturn provides short-term pain but could carry a positive impact on future projects by slowing timelines and forcing developers to focus on the most sound projects.
“In the long-term, when you have a downturn like this, you get a chance to look at what you are doing and think about what is next,” said Bob Hughes, a principal with HGOR, a planning and architecture firm whose portfolio includes Allen Plaza.
Location will remain a key to success for future developments as Atlanta’s traffic congestion impacts where employers want to locate — with buildings close to transit and key thoroughfares and areas with amenities gaining an advantage.
“You want to be close to the expressway system and have a minimal amount of surface streets to get to your destination. Once you get there, you want to be able to park your car and not get back into it until it’s time to go home,” Gore said.
While proximity to rapid transit is an advantage, it’s not yet a necessity for most tenants. But environmentally friendly buildings that offer certification through the U.S. Green Building Council’s Leadership in Energy and Environmental Design, or LEED, rating system is becoming a must.
“It is going to become an increasing issue for corporate America once we get through this recession,” said Bob Voyles, principal and CEO of Seven Oaks Company LLC, a private real estate development and investment firm. “LEED certification will almost be a prerequisite for any type of new development.”
Areas that already offer infrastructure and allow for more dense development will be well-positioned to take advantage of an economic recovery. Those locations don’t just include prominent submarkets such as Buckhead, Midtown and Perimeter Center, but downtowns in Suwanee and Duluth and other suburban areas that offer an opportunity for a higher quality of life, said Brian Leary, vice president of design and development for Atlantic Station LLC.
“As we move to a higher-density intown development mode over the next 20 years, I think it will actually be quite a renaissance for Atlanta,” Leary said.