Atlantic Station, a 12 million sq. ft. mixed-use project underin Midtown Atlanta, has overcome a series of environmental and financial obstacles since Jacoby Development first drafted plans to redevelop the 140-acre brownfield site in 1997. The latest hurdle: an extremely weak office market.
began in April on a 400,000 sq. ft. office tower at Atlantic Station in Midtown, where the office vacancy rate already registers 25%. An additional 100,000 sq. ft. of office space will be built atop two of the retail buildings in Phase 1, according to Atlantic Station LLC, the project's developers. When fully built out, Atlantic Station will include up to 6 million sq. ft. of office space, if developers have their way.
But can the beleaguered office submarket support any new construction? “Our first office tower is already more than 50% pre-leased,” says Charles Brown, vice chairman of Atlantic Station and the head of CRB Realty, which is in charge of office leasing for the project. “There is room for smart growth. Companies see the value in providing their employees with easy access to public transportation and everyday conveniences.” The office tower, to be named 171 17th Street, will be anchored by SouthTrust Bank (95,000 sq. ft.) and Arnall Golden Gregory (135,000 sq. ft.), one of Atlanta's largest law firms.
Jim Durrett, executive director of the Urban Land Institute's Atlanta District Council, says that just because the vacancy rate in Midtown is high doesn't mean there isn't tenant demand for a well-designed building in a strong location. “There are projects in Midtown that are in great locations and have a great feel to them that are significantly higher than 75% occupied.”
The recent announcement by Hines that it plans to build a 41-story office tower at Symphony Center offers strong evidence of the interest companies have in Midtown, says Brown (please see related story on opposite page).
Phase I of Atlantic Station, to be completed by early 2005, will include 800,000 sq. ft. of retail, entertainment and restaurant space. Nearly half of that space was pre-leased as of late April. The goal is to have the retail portion 80% leased when Phase 1 opens, says Bruce Macleod, managing director of retail at Atlantic Station. “It's one of the extraordinary properties in the United States,” says Macleod, referring to the project site at the nexus of I-75 and I-85. “How many times can you get a parcel of this size in a city that has experienced the kind of growth Atlanta has had? It just doesn't happen.”
A three-level, 225,000 sq. ft. Dillard's department store will anchor the retail project, which will include a 16-screen cinema. Meanwhile, The Lane Cos., a multifamily developer and manager, will oversee the residential portion of the project, which will include more than 500 apartments plus 69 condominiums.
The Jacoby Development Corp. paid $76 million to purchase the land in 1999 and spent $25 million to clean up the site, according to Jim Jacoby, chairman of Atlantic Station. The project also required several improvements to the infrastructure. The 17th Street Bridge now under construction will connect Atlantic Station to I-75 and I-85 at a cost of $38.2 million.
Early on in the project, several developers backed out for various reasons. Stung by a weak economy and an overly ambitious development pipeline, Post Properties pulled out as the residential developer two years ago. Citing a lack of residential and office developers for the project, Mills Corp. also abandoned its plans in 2001 for the retail component.