Net completions have not weighed too heavily on the market during this cycle. Customarily, about 5.2 million square feet are added to the Atlanta metro on an annual basis, which is why the lack of building this cycle is so striking. From 2011–17, just three-quarters of one million square feet of inventory was added annually. And with the relatively rapid conversion of office towers into apartments and hotels, actual net stock change has averaged closer to 500,000 square feet added per year. Comparably, the net stock change was more than four million square feet per year during the last expansion cycle.
One of the biggest projects of the cycle, on an absolute square foot basis, is State Farm’s 1.2 million square foot campus in the Central Perimeter. The first 600,000 square foot building delivered at the end of 2016, at which point employees started to vacate the more than one million SF that they have moved into over the past few years while waiting for their new home. The second phase of the insurance giant’s campus expected to hit the market at the end of 2019. Other companies with build-to-suit projects in the works or recently completed include Comcast, HD Supply, Genuine Parts, Mercedes-Benz, and NCR. But the heavy share of BTS projects does not preclude speculative developments.
An increasing number of speculative developments have been ramping up. Tishman Speyer’s Three Alliance, a 507,000 SF tower in Buckhead, completed in the spring of 2017. Global Payments, CBRE, and State Street Global Advisors are some of the largest confirmed tenants, leaving less than 10% of the project still available when it sold at the beginning of 2018 for an Atlanta record of $533/SF. Similary, the 308,000 square foot Riverwood 200 (May 2017 delivery) in the Cumberland/Galleria Submarket was over 80% leased at the beginning of the year. Such success in the speculative arena has encouraged more development, with about half of all space under construction in 2018 starting without a tenant.
Although loft offices are still a niche market in Atlanta, their popularity with tenants has not gone overlooked. The largest example is the landmark Ponce City Market conversion project which includes over 615,000 square feet of loft office space in the former Sears Warehouse space. This project has solidified the Old Forth Ward neighborhood with rents over $40/SF. Several other loft office conversions are currently underway, particularly on the westside of Atlanta.