Wachovia's acquisition of SouthTrust Corp. in June could leave some Atlanta landlords feeling jilted because consolidation of space generally follows mergers.

Not only is Charlotte, N.C.-based Wachovia a major tenant in the city's central business district, but SouthTrust also recently moved 300 employees into a prominent new 20-story office tower in Midtown. The Birmingham, Ala.-based bank financed the 400,000 sq. ft. building, and the firm occupies 95,000 sq. ft. Together, the banks occupy 1 million sq. ft. of space in Atlanta.

SouthTrust's new structure, named 171 17th St., is the first of about a dozen office buildings planned for the prominent mixed-use project, Atlantic Station, located at the nexus of interstates 75 and 85. SouthTrust's exit would be a setback for the development — and it would not be the first. The project also sought, but lost, a new $200 million Georgia Aquarium to downtown Atlanta.

Wachovia occupies more than 300,000 sq. ft. and several floors in 191 Peachtree Tower, a 50-story building owned by Equity Office Properties Trust in downtown Atlanta. Wachovia's lease expires in late 2008. The 1.2 million sq. ft. building lost two huge tenants in 2003. Law firms King & Spalding and Powell Goldstein Frazer & Murphy both said they would move to other properties by 2005.

What will happen to the banks' leases? “It's too early too tell, but my sense is the bank will choose the most cost-effective solution, 191 or Atlantic Station,” says Bob Voyles, senior vice president of Hines in Atlanta. Hines owns a 10% stake in 191 Peachtree Tower. Neither bank was available to comment about its real estate holdings.

Wachovia will have a 15-month integration period to make such decisions, the bank said in a statement. In addition, shareholders and regulators must approve the deal, which is expected to close by the end of the year.

Previous banking consolidation may offer a clue to what action Wachovia ultimately may take. Just three years ago, the bank merged with First Union Corp., and subsequently consolidated employees at 191 Peachtree Tower, leaving five empty floors in 999 Peachtree, a 605,000 sq. ft. building near the CBD owned by Childress Klein Properties. “[Wachovia] had a big lease downtown, with more square footage, and a lease with a longer term,” says John Decker, a partner at Childress Klein. “It was the right business decision.”

The same scenario could play out again. Wachovia may not have enough room to consolidate at the Atlantic Station building, where law firm Arnall Golden Gregory will occupy 135,000 sq. ft. this fall. Plus, “it's a brand-new building with a long-term lease, which would be an easier sublease assignment,” Decker says.

Another option is that Wachovia, which has several large leases in Charlotte, also could keep both properties. SouthTrust's Atlantic Station building has a prime marketing location. About 500,000 commuters pass the building's giant logos every day.

Many developers in the Atlanta real estate industry are bullish on Atlantic Station's future. “A lot of us were skeptical, but my hat is off to them for pulling this off,” Voyles says.

But Wachovia could always take a third option and build a new site for itself. That will depend on how the market looks at the time, says Decker. “Of course, now it's all speculation.”