Atlanta’s Buckhead Office Market – 4th Quarter Report
Here are the highlights for Buckhead’s 4th Quarter Office Market Report written by our Research Department here at Colliers International.
As expected, the Buckhead submarket had the largest amount of vacant space added over the past year. The deliveries of Terminus 200 and Two Alliance Center account for this increase.
Buckhead is beginning to see some pickup in leasing activity at its newest buildings. Weinberg Wheeler and Turner Construction are the most recent announced leases. The problem is, however, these are intrasubmarket moves, meaning net absorption will be minimal for the submarket as a whole.
The Buckhead office vacancy rate will likely jump to 25% by the end of 2010; Class A vacancy could possibly reach 30%. Future development in the submarket could be shelved for 8 to 10 years.
In the News:
Unfinished projects weigh on banks: A recent article posted in the Wall Street Journal highlights the Streets of Buckhead project under construction in the Buckhead submarket, noting the impact stalled commercial real estate projects such as this one is having on the banks which funded them. The article mentions how Bank of America is likely to face a loss on the $160M loan it originated with the developer of Streets of Buckhead. Currently, the developer and bank are identifying ways to raise new money in order to get the project completed and to minimize the continued losses due to cost overruns and drop in values.
Tower Place 200 sold for $32 million: The most recent high-profile office foreclosure goes to Tower Place 200. The 259,888 SF high-rise was foreclosed on and sold to CW Capital for $32 million in December 2009. The building was originally purchased in 2006 for $58 million.
Duke Realty takes $50M hit on 3630 Peachtree: Duke Realty had to take a $50 million write-down on the value of 3630 Peachtree; a substantial hit on a new building which has yet to land an anchor tenant. As mentioned by the Atlanta Business Chronicle, “the write-down reflects Atlanta’s position as one of the centers of the real estate crash.” The loss in value has become a growing problem to banks such as Bank of America, the construction lender for the 3630 Peachtree building. These types of scenarios explain bank reluctance to financing.