Buckhead in Atlanta a Microcosm For Commercial Real Estate?
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Reading through the local paper I came across an article on how Buckhead is about to have a glut of Class A office space in the coming year. For those of you that do not know, Buckhead is “the place to be” in Atlanta business these days, just north of downtown.
With all of the cheap money that has been floating around the past few years development has been rampant. So now the question is, if the best area in down is going to see price deflation in commercial space, what is that going to do to the rest of Atlanta’s commercial rates?
Or put it this way. If the prime rates in the best area are lower than those in less desirable areas, why would anyone sign a lease till the smoke settles? If I can have a prestigious address for less than my present address, will I move? And what will my landlord have to do to keep me?
These are questions that the rest of the country is going to run into as the boom in commercial construction comes to a head in the coming years. It is not just Buckhead in Atlanta, but most other cities as well. When new construction lease rates are cheaper than old construction, how will the market find equilibrium?
Almost 2 million square feet is under construction and scheduled to come online next year, but the vast majority of that space is unleased.
That’s “definitely a cause for concern” for the building property owners, David Demarest, managing director of tenant representation with Jones Lang LaSalle, told commercial real estate representatives.
Jones Lang LaSalle hosted a breakfast meeting to unveil its analysis of the intown office market.
Demarest mentioned three large buildings that are under construction without any prelease agreements: Terminus 200, 3630 Peachtree Road and Two Alliance Center. Another Buckhead building, 3344 Peachtree, which is mixed use, is about half leased.via the ajc.com.
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