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Developers Bet Creative Office Market Can Work in Atlanta

Several Developers Ready to Start Projects in Upper Westside
July 30, 2018
Rendering of Atlantic Capital Properties' and Gateway Ventures' $150 million 8West project in Atlanta's Upper Westside.

Credit: Atlantic Capital Properties and Gateway Ventures.

When multifamily developers built apartments in Atlanta's Upper Westside neighborhood, millennial renters came over in droves.

But will office tenants follow suit and relocate to an old industrial area that had been devoid of ground-up office development for decades? Atlanta is about to find out.

In the past week, three developers made major announcements centered on financing for new mixed-use projects in the Upper Westside with significant creative office components. Atlantic Capital Properties, a development firm headed by Atlanta developer Jim Meyer, and Gateway Ventures led by Mack Reese said Monday they will acquire nearly five acres for a mixed-use development called 8West that will include a 175,000-square-foot creative office in a nine-story mixed-use building. The $150 million project will also include ground-floor retail and 264 apartments.

Also on Monday, Virginia Beach-based REIT Armada Hoffler Properties (NYSE:AHH) said it would be an investor in The Interlock, a mixed-use public-private development at Howell Mill and 14th Street that will include 200,000 square feet of creative office space in addition to 90,000 square feet of retail space, 350 apartment units, 70 single-family townhomes and a 125-room boutique hotel. Georgia Tech, a partner in the development with Atlanta-based retail developer S.J. Collins Enterprises, will anchor The Interlock's office component.

These announcements come on the heels of The Allen Morris Co., a 60-year-old Miami development firm, securing a $90 million construction loan for the 409-unit Star Metals Residences at 1055 Howell Mill Road. That building will be adjacent to Star Metals Offices, a new 14-story office tower that will comprise 230,000 square feet of creative office space and 30,000 square feet of retail.

The three projects are within a mile of Atlantic Station in West Midtown, where Hines broke ground in June on T3 West Midtown, a seven-story, 205,000-square-foot heavy-timber creative office building.

Multifamily and retail developers discovered the Upper Westside portion of West Midtown about a decade ago, and their office counterparts now are following because it's where millennials want to live, work and play due to the area's cluster of restaurants, cool bars and hip entertainment venues.

Though no official boundaries exist, the Upper Westside begins roughly at Howell Mill and Marietta Street and extends to the intersection of Bolton Road and Marietta Boulevard near the Chattahoochee River.

All told, Atlanta's emerging Upper Westside office market, formerly a center of the city's industrial activity, has more space under construction than the heart of Atlanta's financial district in Buckhead, where several buildings are in the works but have not yet broken ground. In previous upcycles, Buckhead has been the epicenter of speculative office development.

In Atlanta, demand for creative and loft-style offices outstrips supply - by far. Local developer Third & Urban estimates that creative office space accounts for less than 5 percent of Atlanta's overall office market, while it accounts for 25 percent of demand.

Creative office space typically offers tenants more of an open office environment and areas for collaboration and amenities such as game rooms and dining areas usually not found in traditional set-ups where closed-door offices surround groups of cubicles. Creative offices tend to be located in walkable areas of a city surrounded by restaurants and retail and not suburban office parks that require driving to lunch.

At 8West, Meyer his team have lined up key parts of the capital stack needed to turn its plans into real developments. Harvest Capital Group, an Atlanta-based commercial real estate investment group, and Ellis, McQuary, Stanley & Associates, an investment firm headed by major technology investors Bert Ellis and Mike McQuary, are equity partners in 8West.

Meyer said he and Gateway initially saw signs that companies wanted to be in Midtown when they developed the Centergy at Tech Square office tower on Spring Street in the early 2000s. Being close to Georgia Tech helped firms fulfill their recruitment and research needs, he said.

"As Midtown has changed and the economy evolved, we now see a similar demand for space on the Upper Westside," Meyer said. "With 8West, we have designed a project which will appeal to creative companies and individuals who value walkability and unparalleled access to the best restaurants and entertainment venues in Atlanta - a place where people want to be."

In addition to the creative office space, 8West will include the existing 15,000 square feet of retail that houses Bartaco, Bocado and Arden's Garden and a new 680-vehicle parking deck. Also, Trammell Crow Residential plans to develop an adjoining 264-unit luxury residential component.

At Star Metals, Allen Morris already has signed an anchor office tenant. IWG's Spaces, the largest co-working and shared office company in the U.S., has leased 56,121 square feet in Star Metals' office component.

"Our intent with Star Metals Offices, from concept forward, was to cater to innovative professions, along with tech-savvy companies and individuals seeking a superior workplace to recruit and retain Atlanta's most talented and competitive workforce," said Allen Morris, chairman and chief executive officer of Allen Morris Co.

Allen Morris expects to complete the first components at Star Metals in the spring of 2020. The developers of 8West, which will be marketed by Stephen Clifton and Zach Wooten of PMRG, also expect to deliver their mixed-use tower that spring.

Tony Wilbert, Atlanta Market Reporter  CoStar Group   
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