Many industry experts have commented that Atlanta is running out of room. Large HQ relocations and consolidations, like PulteGroup’s relocation from Detroit and State Farm’s regional consolidation to the Central Perimeter submarket, have taken some of the largest remaining blocks of contiguous space. Following the basics of supply and demand, if there is more demand than supply, the supply needs to be increased in order to keep stability in the market. But developers are a little nervous when it comes to building new office towers; is it really safe to invest tens of millions of dollars to build a new tower when business needs and demands are changing every quarter? We’ve already reported on the fact that older buildings are struggling to compete with the newer buildings that boast energy efficient systems and smaller floor plates. Atlanta is still recovering from 2008’s economic downturn, and you’re hard-pressed to find a developer who is willing to build 500,000 SF all at once – too much could happen by the time is delivers. But we need somewhere to put new companies and companies expanding into the Atlanta market, so what are we going to do?
Atlanta has seen a dramatic increase in interest in the smaller office buildings, usually in the 100,000 – 150,000 SF range. While these buildings don’t offer great views of the city and walkability options like some of the Midtown and Downtown towers do, these smaller office buildings are looking more and more attractive to prospective tenants. Tenants who want to play a larger role in the building are seeking out these smaller buildings; controlling my space in the building means being able to exert more control over their environment.
Another trend that is developing in order to accommodate investor anxiety about constructing enormous new towers is incorporating more office space into mixed-use developments. At least two developments around Atlanta have already been built where the feature of the development is on the retail space rather than the office space.Share