An Atlanta developer is relying on the legacy of a Southern Civil Rights hero to create a new city center in Atlanta's downtown. Barry Real Estate Cos. has lured two large corporate tenants, energy giant Southern Co. and accountants Ernst & Young, out of nearbytowers to anchor two of three planned buildings at what Barry calls Allen Plaza.
The $300 million, 1.2 million sq. ft. office project — which also will include retail and a 250-room— is located a few blocks from the new $200 million Georgia Aquarium scheduled to open in November, and a new World of Coca-Cola museum, coming in 2006.
Allen Plaza is named for Ivan Allen Jr., Atlanta's mayor during the Civil Rights Movement. Atlantans respect Allen as the man who desegregated City Hall and the only Southern mayor to ask Congress to ratify the Civil Rights Act. Allen died in 2003 at age 92, while Barry was quietly acquiring a series of parking lots controlled by Houston-based Hines.
Barry officials say that their project, coupled with the new attractions, will help restore Atlanta's troubled downtown, which has lost many employers and much of its retail base. But other real estate pros wonder if the market can absorb more new office space, much of it speculative.
The area had been named Centennial Hill after Atlanta's Centennial Olympic Park a few blocks away. “But that didn't bring any sense of place,” says Chris Schoen, Barry's vice president. “We were searching for an identity.” Barry paid Allen's family an undisclosed sum for the right to use the name, a tribute Schoen says has already paid off. “Potential tenants have responded terrifically,” he says.
Barry's first two tenants, Southern Co. and Ernst & Young, will each anchor several floors in their own roughly 300,000 sq. ft. buildings in the complex, leaving the rest for Barry to fill. Southern's building is underand Ernst & Young's will break ground later this year.
Barry is courting tenants for a 600,000 sq. ft., 34-story signature tower at the site, potentially adding even more speculative space to the market. All three buildings in the project have raised eyebrows, given the fact that Atlanta's downtown submarket has a Class-A vacancy rate of 18.2% and about 2.4 million sq. ft. of available space.
Several nearby properties are struggling to find tenants, including one of the area's landmarks, Equity Office's 191 Peachtree Tower. Three tenants at the Equity Tower, including two large law firms and Wachovia, have said they'll move elsewhere.
Downtown Atlanta is a “very tough market with a lot of Class-A space on the street leased at extremely competitive numbers,” Tom Bell, CEO of Cousins Properties, told investors in February. Cousins owns a nearby property, One Georgia Center, which is 15% leased. Barry's Allen Plaza project, he said, shows “they have more confidence in that market than we do.”
Schoen acknowledges downtown's challenges, but he believes his project will draw business back to the city center. “The existing downtown market is tough and 191 Peachtree Tower has taken its lumps. But, frankly we're of the belief that if we can pull off what we're trying to pull off, it will help the balance of downtown,” Schoen says. “And it's almost downtown's best real shot at being able to come back.”
And Barry is not alone. Multifamily developers Novare Group and Wood Partners plan more than 1,000 condominiums on an adjacent site. And both developers are enjoying specially designed tax incentives from the city, county and public school system designed to bringto Atlanta's challenged core. Barry's first building, planned for Southern Co., stands to get $2 million in local incentives.
“Granted, we're making a big bet,” says Schoen, an Atlanta native. “We're pioneering a little bit, but if we can pull it off it will be the most recognized landmark in Atlanta.”