Downtown Atlanta Real Estate Report NOV09 Salute Atlanta’s Visionary Builders n this inaugural issue of the portion of the property as a site for Emory Downtown Atlanta Real University in 1914. Estate Report, it is only John C. Portman, Jr., who hailed from Walhalla, South Carolina, graduated from appropriate to celebrate the the Georgia Institute of Technology in vision and determination 1950. His huge impact on Downtown Iof key individuals who have shaped is evident in the massive AmericasMart complex, Peachtree Center, Westin Downtown’s development. A Peachtree Plaza, Marriott Marquis, civil engineer from Hurtsboro, Hyatt Regency, and SunTrust Plaza. Alabama, left an early imprint by These developments shifted the nexus developing Atlanta’s first modern Original Equitable Building of Downtown northward from the Five Points area. When the Hyatt Regency office building and establishing a transit link to the city’s first residential opened in 1967, people came from all over suburb. Joel Hurt was a true entrepreneur who had business interests in to gasp at its soaring atrium and enjoy the insurance, real estate, and banking industries. In 1886, he founded East the view from the blue-domed Polaris Atlanta Land Company, which led to the development of the Atlanta and restaurant. A 1952 graduate of the University Edgewood Street Railway Company and Inman Park. At the Downtown end of Georgia, Tom Cousins has also had of Edgewood Avenue he built the original Equitable Building (current site a major hand in shaping Downtown, of SunTrust Tower) in 1892 and the Hurt Building in 1913. He later served particularly during the 1970’s. He and on the first City Planning Commission. Portman competed intensely for the location of the Georgia World Congress Asa G. Candler, who became sole Equitable Building were considered far Center, fully anticipating its impact on owner of the Coca-Cola Company in out and remote when built, according to the hotel industry. Cousins convinced 1891, reinvested his profits in real estate Franklin Garrett’s Atlanta and Environs. state authorities to locate this facility ventures. His crowning achievement was Candler later developed the Druid Hills near The Omni, a sports arena he had the Candler Building, a 17-story building community on 1,492 acres purchased built in 1972 to house the Atlanta Hawks that opened in 1906. Both it and the from Joel Hurt in 1908, and donated a see Atlanta’s Visionary Builders page 6 Inside This Issue Notable Trends The Downtown Atlanta Real Estate Report is prepared bi-annually by Haddow & Company Office Market . 2 • The City of Atlanta’s for Central Atlanta Progress. For further Hotel Market. 3 population has information or to Retail Market . 4 increased 29 offer any comments, Residential Market . 5 percent since 2000. please contact: Atlanta Development Chronology. 6 • Economic and Haddow & Company housing indicators The Hurt Building Did You Know? Downtown Atlanta suggest that the 50 Hurt Plaza, Suite 920 Atlanta, Georgia 30303 once had two passenger railroad stations: worst of the current Phone (404) 577-7222 Terminal Station was built in 1905, economic recession demolished in 1971; Union Station was Fax (404) 577-7276 is over. [email protected] built in 1930, demolished in 1972. www.haddowandcompany.com Office Market Weathers the Storm he economic downturn has negatively affected metro boasts an impressive tenant roster, many of whom relocated from Atlanta’s office market, and Downtown is no exception. As other submarkets. In addition to Cousins moving its corporate of mid-year 2009, Class A and Class B office space totaled headquarters from the suburbs to 191 Peachtree, Cooper Carry 16,529,915 square feet, and Downtown’s vacancy rate stood moved from Buckhead and Winter Construction migrated from Tat 22.3 percent (including sublet space), according to Jones Lang Midtown. Allen Plaza, an exciting mixed-use development on the LaSalle. The average asking rent was $20.25 per square foot. Negative north end of Downtown, has also enjoyed success, attracting such absorption of approximately 142,030 square feet was recorded in the high-profile tenants as Ernst & Young LLP, Southern Company, and first six months of the year. A contributing factor was Georgia-Pacific’s Cushman & Wakefield. Despite a challenging economic environment, recent strides have consolidation, which vacated 90,000 square feet at 55 Park Place. been made in the Downtown office market. The Nuclear Regulatory These setbacks follow a stellar 2008 in which Downtown posted Commission recently signed a lease for 102,436 square feet in net absorption of roughly 544,026 square feet, the strongest Peachtree Center’s Marquis II. SunTrust decided to maintain a performance of any metro Atlanta office submarket. The purchase strong presence in Downtown after evaluating opportunities in other of 191 Peachtree Tower by Cousins Properties was a major catalyst. submarkets. The bank will occupy 252,822 square feet in Peachtree The building was only 51 percent leased and 20 percent occupied Center’s Marquis II, starting in 2011. Eola Capital, an Orlando-based when it was purchased in 2006. Today, it is 75 percent leased and company, recently made a major investment in Downtown by OFFICE ABSORPTION & VACANCY TRENDS purchasing Peachtree Center, 400,000 30% which is comprised of six buildings totaling 2.4 million square feet. 300,000 25% Several factors suggest the 20% Downtown office market will 200,000 regain positive momentum once the economy rebounds: 15% 1) no buildings are under 100,000 Square Feet construction; 2) rental rates Vacancy Rate Vacancy 10% are attractive compared to 0 Buckhead and Midtown; 3) 5% several prominent Atlanta companies have made long-term (100,000) 0% commitments to the area; 4) 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q superb MARTA and interstate 07 07 07 08 08 08 08 09 09 highway access; and 5) strong Net Absorption Vacancy Rate (w/sublet) population growth in the urban core. Source: Jones Lang LaSalle. One Ninety One Peachtree Tower RECENT LEASING ACTIVITY Tenant Property Square Feet SunTrust Peachtree Center - Marquis II 252,822 Deloitte & Touche 191 Peachtree 123,964 Nuclear Regulatory Commission Peachtree Center - Marquis II 102,436 Parker Hudson Rainer & Dobbs Peachtree Center - Marquis II 55,000 Ogletree Deakins 191 Peachtree 26,255 Winter Construction Company 191 Peachtree 24,983 Eyewonder Peachtree Center - Int’l Tower 24,213 Elsevier Peachtree Center - Marquis I 20,298 S.L King & Associates 270 Peachtree 13,924 Behavioral Health Link 260 Peachtree 12,341 Sources: Colliers Cauble, CoStar Group, and Jones Lang LaSalle. SunTrust Plaza 2 | Downtown Atlanta Real Estate Report • NOV09 Hotels Respond to a Challenging Economy utbacks in corporate and leisure facilities, and five convention hotels account travel have taken a steep toll on for roughly half of the room inventory. More Downtown hotels. The average than 80 percent of the rooms were delivered occupancy rate for the first prior to 1990, and no major hotel (250+ Chalf of 2009 was 53.9 percent, down from rooms), other than the Embassy Suites and 60.2 percent in 2008, according to PKF the Omni expansion, has been built since Consulting. The average daily rate dropped 1985. However, 818 rooms have been added slightly from $142.36 in 2008 to $141.17 in smaller facilities since 2006. A 242-room Hilton Garden Inn was completed in 2008 during the first half of 2009, while revenue across from Centennial Olympic Park, and per available room (RevPAR) declined a W Hotel (237 rooms) opened in 2009 at from $85.65 to $76.11. The Georgia World the Allen Plaza mixed-use development. Congress Center and the Georgia Dome, two A growing market segment is boutique major sources of room demand, reported hotels. In addition to the Hotel Indigo under that event attendance in 2008 was down construction, The Ellis (127 rooms) and The 16.4 percent from 2007. This trend will Glenn Hotel (110 rooms) recently opened in likely continue in 2009. However, the City historic buildings that were previously vacant. of Atlanta’s hotel market is expected to The hotel industry is facing a challenging improve in 2010. A recent edition of The TAP economy. Downtown Atlanta hotels are Report, prepared for the Atlanta Convention suffering, but the area’s visitor attractions, & Visitors Bureau, shows that the number as well as its popularity with meeting of definite room nights booked for 2010 planners, will help foster a recovery when (through August) is well above 2009 levels the economy improves. The Ellis Hotel for the same period, which should benefit HOTEL DELIVERIES BY YEAR Downtown. Long-term prospects are more encouraging. A critical mass of attractions is forming around Centennial Olympic 6,000 Park, making Downtown the region’s prime tourist destination. Another growing demand source is Downtown’s resurgent office market, which has attracted a number 4,000 of high-profile companies in recent years. The Hotel Indigo, a 155-room boutique hotel, is the only facility currently under construction in Downtown. Several hotels Number of Rooms 2,000 are planned, but soft market conditions and a lack of financing have delayed development. One noteworthy project is the Toyoko Inn, a proposed 861-room hotel at 0 the corner of Forsyth and Luckie streets. The Prior to 1980 1980 to 1989 1990 to 1999 2000 to 2009 facility will have small rooms and reportedly cater to business travelers. Although new construction activity is limited, several OCCUPANCY AND ROOM RATE TRENDS major hotels completed significant renovations in the past year, including the Occupancy Average Marriott Marquis, Hilton, and the Ritz- Year Rate Daily Rate RevPAR Carlton. Construction of a new pedestrian 2004 58.5% $120.74 $70.57 sky bridge linking the Marriott Marquis 2005 63.2% $123.27 $77.92 and the Hyatt Regency will start soon.