ATLANTA | Development Thread VI

[RocketSurgeon]

Originally Posted by Atlanta3000

Again not to be Negative Nancy, but Midtown has substantially more residential and doesn't seem to have the capacity to support retail.

I keep hearing this but I don't understand where it's coming from. I don't know the numbers but it seems like at least 90% of the retail space in Midtown is occupied. The only building I can think of that seems kind of empty is Lowes, and even they have a couple big tenants, like Cafe Intermezzo. A lot of new space has been coming and it's filling up as quickly as it's being built.

If you're thinking more along the lines of clothing and furniture, Atlantic Station has a practical monopoly on that, and while the architecture of the place leaves a lot to be desired it's certainly close enough to be considered part of Midtown, at least in geographical terms.

If you're thinking high-end stuff, Buckhead is well-established and will always be the destination for that.

[Atlanta3000]

Originally Posted by jsvh

Can we get some more details on how you think this area won't be like these renders? If you are implying this project will somehow be a "failure" I want to be able to revisit this in a few years and evaluate because I think this is the best project in the city right now.

I am not saying any of these proposed developments will necessarily fail, but will adapt to the reality of what the market will bear. Therefore, I don't think the pictures Newport presented are really realistic. Why? Economics again.

Currently Downtown retail lease rates are sub $15 per sqft. Buckhead's vary from $40 - 65 per sqft. On the commercial side, you have 55 Allen Plaza (The Earnest and Young building) in Downtown leasing @ $17 per sqft (http://www.loopnet.com/Listing/18867...NW-Atlanta-GA/ ). Whereas the new Techrise building in Buckhead is leasing at $65 per sqft. Using the simple rule of supply and demand, we can state with absolute certainty Buckhead and even Midtown provide the best possible return on invest with regard to areas ITP.

I believe core Downtown suffers 3 major problems:

1. Downtown demographics are a major challenge with per capital income under $40K
2. True or not - people in the Atlanta metro area view Downtown as dangerous. The same goes for people outside of Atlanta
3. Lastly, Newport's plan appears to "pepper" retail over several blocks.

In my opinion, for Atlanta to break the negative perception, increase the economic demographics of the area and draw tourist and people OTP, the developer that focuses on a VERY dense entertainment, retail, hospitality and residential development stands the best chance to succeed.

Sure the Turner Field Redevelopment, Underground and Newport projects look nice, but they not going to be the game changer Downtown needs. As a matter of fact, all three have the potential to cannibalize each other. Additionally these project are phased developments to could not see a full build out for 10+ years. In contrast the Gulch development will be a $1+ Billion development in just one phase. My money is on the Gulch project and the future residential development on the Westside.

[Atlanta3000]

Originally Posted by RocketSurgeon

I keep hearing this but I don't understand where it's coming from. I don't know the numbers but it seems like at least 90% of the retail space in Midtown is occupied. The only building I can think of that seems kind of empty is Lowes, and even they have a couple big tenants, like Cafe Intermezzo. A lot of new space has been coming and it's filling up as quickly as it's being built.

If you're thinking more along the lines of clothing and furniture, Atlantic Station has a practical monopoly on that, and while the architecture of the place leaves a lot to be desired it's certainly close enough to be considered part of Midtown, at least in geographical terms.

If you're thinking high-end stuff, Buckhead is well-established and will always be the destination for that.

Core Midtown's retail is heavily focused on restaurants - why should you and I be concerned?

How many restaurants fail in the first year?
The fact that restaurants fail at an alarmingly high rate, as 90 to 95 percent in the first year, is actually wrong. According to recent studies done by Professor Dr. HG Parsa 59% of hospitality facilities fail in the period of 3 years.

Make Sense?

[jsvh]

Originally Posted by Atlanta3000

I am not saying any of these proposed developments will necessarily fail, but will adapt to the reality of what the market will bear. Therefore, I don't think the pictures Newport presented are really realistic. Why? Economics again.

Currently Downtown retail lease rates are sub $15 per sqft. Buckhead's vary from $40 - 65 per sqft. On the commercial side, you have 55 Allen Plaza (The Earnest and Young building) in Downtown leasing @ $17 per sqft (http://www.loopnet.com/Listing/18867...NW-Atlanta-GA/ ). Whereas the new Techrise building in Buckhead is leasing at $65 per sqft. Using the simple rule of supply and demand, we can state with absolute certainty Buckhead and even Midtown provide the best possible return on invest with regard to areas ITP.

I believe core Downtown suffers 3 major problems:

1. Downtown demographics are a major challenge with per capital income under $40K
2. True or not - people in the Atlanta metro area view Downtown as dangerous. The same goes for people outside of Atlanta
3. Lastly, Newport's plan appears to "pepper" retail over several blocks.

In my opinion, for Atlanta to break the negative perception, increase the economic demographics of the area and draw tourist and people OTP, the developer that focuses on a VERY dense entertainment, retail, hospitality and residential development stands the best chance to succeed.

Sure the Turner Field Redevelopment, Underground and Newport projects look nice, but they not going to be the game changer Downtown needs. As a matter of fact, all three have the potential to cannibalize each other. Additionally these project are phased developments to could not see a full build out for 10+ years. In contrast the Gulch development will be a $1+ Billion development in just one phase. My money is on the Gulch project and the future residential development on the Westside.

So basically any success that happens in downtown you are going to attribute to the Gulch and not all these other projects that happening in the area?

Put me in the camp that doesn't think mega-projects are the answer. Trying to bring the Alpharetta Unicorn into downtown for an evening is not how you revive downtown. If this Gulch project fails and that land sits empty for another decade until eventually becoming MMPT or something I still think Downtown has a bright future due to all this other stuff going on. The area will see solid rent growth and these projects will see a much higher RoI than other areas of town with or without the Gulch. Things like this Newport South Downtown project and the even smaller stuff is much more important.

[Atlanta3000]

Originally Posted by jsvh

So basically any success that happens in downtown you are going to attribute to the Gulch and not all these other projects that happen in the area?

Put me in the camp that doesn't think mega-projects are the answer. Trying to bring the Alpharetta Unicorn into downtown for an evening is not how you revive downtown. If this Gulch project fails and that land sits empty for another decade until eventually becoming MMPT or something I still think Downtown has a bright future due to all this other stuff going on. The area will see solid rent growth and these projects will see a much higher RoI than other areas of town with or without the Gulch.

JSVH - clearly you are a Downtown booster and I love your passion, but I need to set outside your bubble and put yourself in shoes of a banker that is being asked to provide financing for these projects you love. Given all of the risks in retail today, do you really feel a banker would be very supportive of a retail project that will need a minimum of $28 - 35 per sqft to break even when the comp set is sub $15 per sqft.

With that said, the light at the end of the tunnel is if the Gulch development can prove downtown can support leasing rates comparative to other areas ITP, you could see the banks come begging to lend support. Remember - no one wants to be the first, especially today.

[montydawg]

A few thoughts on Underground Atlanta.

- I thought that they would try to re-market this property as something else, due to the 'negative' reputation that UA has had over the years. Perhaps the name recognition is worth keeping the name.
-I wonder if they which block they will build first. Somehow I doubt they will attempt to build all 4 blocks at once, I would hope the grocery would be built first. It seems that is most needed and would be an easy sale to Kroger or Target. I believe if they build a grocer, then residential units will become a lot more desirable in the downtown area. Midtown exploded with residents then restaurants after the grocery stores moved in.
-Love the design. I question whether they will be able to do much right away with the historic facades in the basement, but I would think emphasis will be on the street level activation since people don't like shopping in caves. Honestly I think they should turn the basement into a large event space (facades intact) and concentrate on Retail at street level. If future use dictates, they could convert the basement into retail at a later date.
-It would be cool if the masquerade could relocate to the old Coca-Cola Museum. I gather the structure is not built well for shows and would be too small, but I hate for them to loose that location. Perhaps the gulch is where they will move!

[jsvh]

Originally Posted by Atlanta3000

JSVH - clearly you are a Downtown booster and I love your passion, but I need to set outside your bubble and put yourself in shoes of a banker that is being asked to provide financing for these projects you love. Given all of the risks in retail today, do you really feel a banker would be very supportive of a retail project that will need a minimum of $28 - 35 per sqft to break even when the comp set is sub $15 per sqft.

With that said, the light at the end of the tunnel is if the Gulch development can prove downtown can support leasing rates comparative to other areas ITP, you could see the banks come begging to lend support. Remember - no one wants to be the first, especially today.

Yes I do think financing is possible without the Guch. In addition to Underground Atlanta and Newport which of course have been in process before any of this Gulch stuff was public (If anything they are the part of the motivation for the Gulch), I have been personally involved in a smaller project in South Downtown since before even Underground or Newport was public. And we were able to get financing. So no, I do not think the Gulch is needed in order to open up financing in the area.

[atlwarrior]

Originally Posted by Atlanta3000

I am not saying any of these proposed developments will necessarily fail, but will adapt to the reality of what the market will bear. Therefore, I don't think the pictures Newport presented are really realistic. Why? Economics again.

Currently Downtown retail lease rates are sub $15 per sqft. Buckhead's vary from $40 - 65 per sqft. On the commercial side, you have 55 Allen Plaza (The Earnest and Young building) in Downtown leasing @ $17 per sqft (http://www.loopnet.com/Listing/18867...NW-Atlanta-GA/ ). Whereas the new Techrise building in Buckhead is leasing at $65 per sqft. Using the simple rule of supply and demand, we can state with absolute certainty Buckhead and even Midtown provide the best possible return on invest with regard to areas ITP.

I believe core Downtown suffers 3 major problems:

1. Downtown demographics are a major challenge with per capital income under $40K
2. True or not - people in the Atlanta metro area view Downtown as dangerous. The same goes for people outside of Atlanta
3. Lastly, Newport's plan appears to "pepper" retail over several blocks.

In my opinion, for Atlanta to break the negative perception, increase the economic demographics of the area and draw tourist and people OTP, the developer that focuses on a VERY dense entertainment, retail, hospitality and residential development stands the best chance to succeed.

Sure the Turner Field Redevelopment, Underground and Newport projects look nice, but they not going to be the game changer Downtown needs. As a matter of fact, all three have the potential to cannibalize each other. Additionally these project are phased developments to could not see a full build out for 10+ years. In contrast the Gulch development will be a $1+ Billion development in just one phase. My money is on the Gulch project and the future residential development on the Westside.

I disagree GSU is booming, many buildings like Cousins 191, Georgia-Pacific and The Equitable Building have high occupancy with high paying jobs. The Federal, State, County, and City Government workers are good paying jobs. Turner and Coca-Cola also have a significant presence in the city. You also have Castleberry, West End, and Adair Park expanding further into downtown. The daytime population of the city is like 700,000. Why would a worker choose a good place to stay that is close to work. Also, develop will continue to push south from Midtown, especially since the Pine Shelter is closing. King Memorial Marta station and GSU will continue and has push growth from the east into downtown.

[RocketSurgeon]

Originally Posted by Atlanta3000

Core Midtown's retail is heavily focused on restaurants - why should you and I be concerned?

Make Sense?

Honestly, no, it doesn't. The businesses are as varied as I've seen anywhere else. To me it seems like a diverse and healthy market with a bright future. If you'd said it was too focused on restaurants five or ten years ago then I'd agree, but it's not like that anymore.

Edit: Take Peachtree and 7th as an example. If you're standing there, you're less than a block from a lot of restaurants, but also a coffee shop, cellular store, hardware store, bank, dentist, art supply store, nail salon, dry cleaners, real estate office, yoga studio, fitness club, comedy club, night club, two eyeglass stores, a drugstore, and a 24-hour convenience store--and that's where the Hanover tower is going up, so it's not even fully developed yet.

[scania]

Originally Posted by jsvh

So basically any success that happens in downtown you are going to attribute to the Gulch and not all these other projects that happening in the area?

Put me in the camp that doesn't think mega-projects are the answer. Trying to bring the Alpharetta Unicorn into downtown for an evening is not how you revive downtown. If this Gulch project fails and that land sits empty for another decade until eventually becoming MMPT or something I still think Downtown has a bright future due to all this other stuff going on. The area will see solid rent growth and these projects will see a much higher RoI than other areas of town with or without the Gulch. Things like this Newport South Downtown project and the even smaller stuff is much more important.

The Alpharetta Unicorn...here you go with attacks unwarranted. Dude, you need help.

[Atlanta3000]

Originally Posted by RocketSurgeon

Honestly, no, it doesn't. The businesses are as varied as I've seen anywhere else. To me it seems like a diverse and healthy market with a bright future. If you'd said it was too focused on restaurants five or ten years ago then I'd agree, but it's not like that anymore.

Edit: Take Peachtree and 7th as an example. If you're standing there, you're less than a block from a lot of restaurants, but also a coffee shop, cellular store, hardware store, bank, dentist, art supply store, nail salon, dry cleaners, real estate office, yoga studio, fitness club, comedy club, night club, two eyeglass stores, a drugstore, and a 24-hour convenience store--and that's where the Hanover tower is going up, so it's not even fully developed yet.

Focusing just on Midtown - Not Atlantic Station. To my knowledge there is not an apparel store, sporting goods, shoe, home goods, furniture, plant/nursery, consumer electronics.....etc. Not to mention entertainment things like a movie theater, bowling alley or a Dave & Buster type place.

To say Midtown's retail is "diverse" and "healthy" is frankly delusional. Sorry RocketSurgeon, not trying to be an @$$hole because I usually agree with you on most topics.

[Atlanta3000]

Originally Posted by jsvh

Yes I do think financing is possible without the Guch. In addition to Underground Atlanta and Newport which of course have been in process before any of this Gulch stuff was public (If anything they are the part of the motivation for the Gulch), I have been personally involved in a smaller project in South Downtown since before even Underground or Newport was public. And we were able to get financing. So no, I do not think the Gulch is needed in order to open up financing in the area.

JSVH, was your project just retail or mixed-use?

[Atlanta3000]

Originally Posted by scania

The Alpharetta Unicorn...here you go with attacks unwarranted. Dude, you need help.

Pardon my ignorance, but what is an Alpharetta Unicorn?

With regard to this debate, Downtown does need a large scale development to cement and ensure the success of the other projects. Why do you think Atlantic Station, Ponce City Market and Avalon all have been successful? They had DENSITY and SCALE and were not piecemeal.

Why has the Midtown Mile not been successful? It was piecemeal - albeit it I think Colony Square is very promising given the developer's (General Growth Properties) expertise in retail development (Atlantic Station and Avalon to name a few).

[alco89]

Here's a peak at the planned new phases at PCM:

https://www.bizjournals.com/atlanta/...expansion.html

[jsvh]

Originally Posted by Atlanta3000

JSVH, was your project just retail or mixed-use?

Mixed use.

Edit: And my project is hardly the first or only one in the area. This one is larger and will deliver ahead of mine: https://atlanta.curbed.com/2017/7/13...ng-kiser-lofts

Point is, resurgence of this area is hardly dependant on the Gulch. In fact, they are late to the party. Lots of smaller projects are what turns the tide, not one mega project. Heck, no place in the city has suffered from high dollar mega projects more than downtown.

[jsvh]

Originally Posted by scania

The Alpharetta Unicorn...here you go with attacks unwarranted. Dude, you need help.

Originally Posted by Atlanta3000

Pardon my ignorance, but what is an Alpharetta Unicorn?

Hawks CEO: Sought-after middle-aged suburban white guy — aka the 'Alpharetta Unicorn' — won't save the franchise

[Atlanta3000]

Originally Posted by alco89

Here's a peak at the planned new phases at PCM:

https://www.bizjournals.com/atlanta/...expansion.html

Holy shit balls!!!

[jsvh]

I am surprised we have not seen a proposal to redevelop the Home Depot / Whole Foods strip mall across the street from PCM yet. Depending on how long this cylce lasts it may not break ground, but the numbers got to be getting to a point where it makes sense to redevelop that site.

[ATL_J]

Originally Posted by Atlanta3000

Given all of the risks in retail today, do you really feel a banker would be very supportive of a retail project that will need a minimum of $28 - 35 per sqft to break even when the comp set is sub $15 per sqft.

With that said, the light at the end of the tunnel is if the Gulch development can prove downtown can support leasing rates comparative to other areas ITP, you could see the banks come begging to lend support. Remember - no one wants to be the first, especially today.

I'm sort of confused with your logic. Newport can't get financing because leasing rates are bad in South Downtown, but the Gulch development can because rates around the Gulch are so much better?

Moving on from that, when you're trying to finance a project like this you look at analogs both outside and inside the Atlanta market and you also consider the investment the developer is making - hundreds of new rooftops, hotels, etc. While South Downtown or Downtown won't get retail rates that Buckhead does, it doesn't need to. The dirt is relatively cheap and much of the initial retail is going into existing buildings.

Retail will work here because it will be neighborhood serving retail (restaurants, bars, things like gyms, some dry goods) aimed at future South Downtown residents and current residents of Downtown, Castleberry, and other nearby neighborhoods.

This is also a long-term hold with a long-term vision.

[Street Advocate]

Originally Posted by Atlanta3000

Holy shit balls!!!

18 story hotel on Glen Iris, office building along BeltLine, residential building along BeltLine, and potential Apple store is what's detailed in the center. Am I reading this right? I really want to see those parking lots along North Ave have some development, too. Walking along North Ave still isn't enjoyable and we have a major transit line proposed/likely to receive funding.

"Jamestown would add new, significant pieces to the project including a proposed hotel along Glen Iris Drive. It may feature a brand like those of Nomad or Ace hotels.

Two buildings are planned along the Beltline. One would add residential units overlooking the Old Fourth Ward. Another building may be geared to tech companies seeking smaller spaces in the range of 20,000 square feet. That would complement existing Ponce City Market tech tenants such as Athenahealth, which recently said it was expanding to more than 130,000 square feet.

“We want to create an ecosystem that also includes smaller companies,” John Wilson, a Jamestown senior vice president, told community members.

The surface parking lot at the corner of Ponce and Glen Iris is also being eyed for a new building.

In May, Atlanta Business Chronicle reported that Apple Inc. was considering a new store at Ponce City Market. That could go at an existing courtyard in front of Ponce City Market facing North Avenue."