Peach Cobbler
Oct 1, 2007 12:00 PM, By Elaine Misonzhnik
In order to complete the $1 billion project, Atlanta plans to create a special tax district and use city-issued bonds, along with federal and state grants, to fund streetscape improvements, construction of supporting utility infrastructure and land acquisition. It already partnered with 12 private enterprises, including Cousins Properties, Jamestown Properties, Selig Enterprises and Tivoli Properties, Inc., among others, to participate in the creation of Midtown Mile. When completed, the project will contain one million square feet of retail. Currently, the area houses 367,000 square feet of retail space.
Selig Enterprises, in partnership with the Daniel Corp. and the Canyon-Johnson Urban Fund, already started work on the largest component of Midtown Mile — 12th & Midtown — a three-block-long, 2.5-million-square-foot mixed-use development slated to contain 1.2 million square feet of office space, 150,000 square feet of multilevel retail, 600 residences and 500 hotel rooms.
“There has been a resurgence of population moving back into the city and the development on the multifamily side is driving retail demand,” says Shirley Gouffon, senior vice president with Selig. “The Midtown Mile will help redevelop downtown Atlanta to accommodate flagship retail from all over the world.”
Selig plans to deliver the first phase of 12th & Midtown, which will combine 443 residences with 50,000 square feet of retail space, in September 2008. The second phase, combining a 725,000-square-foot office tower, 60,000 square feet of retail and a 400-room hotel, will come on-line in September 2009. Several big-name tenants already signed leases for the space at 12th & Midtown to house their first Atlanta locations, according to Gouffon, but she declined to reveal their names.
Meanwhile, this August, the Peachtree Corridor Task Force revealed plans for a $1 billion streetcar project, which the task force hopes will become the centerpiece of the Midtown Mile redevelopment. Modeled on the streetcar system in Portland, Ore., which received a financial boost from both city and state, Atlanta's streetcar system would feature 90 stops along the Peachtree Street corridor. The Atlanta City Council will deliberate on the project this fall.
What's in store
The big question now is whether, with all that new space in the pipeline, the retail demand in Atlanta will continue to hold strong. Atlanta still ranks among the top 10 cities in the nation for retail sales at $74 billion annually and its real estate fundamentals remain solid, according to the national brokerage firm Marcus & Millichap Real Estate Investment Services. But the vacancy rate for retail properties in the Atlanta metro area will rise 20 basis points this year, to 8.2 percent, while its retail sales growth will slow to 6 percent, Marcus & Millichap researchers estimate. Last year, Atlanta posted retail sales growth of 8.5 percent.
Meanwhile, Atlanta's rental rates will likely remain at their current level, says Lefkoff. Retail rents in the city now average $14.48 per square foot, according to Colliers Spectrum Cauble, and the developers with projects now in construction had better prepare themselves for a tenant's market.
“The majority of national retailers that I have seen are not going above a $30 mark to do a deal here unless it's in the heart of Buckhead or in another area that is so dense it's virtually impossible to get into,” says Lefkoff. “And even then it would be rare to see them go above $35 per square foot.”
The condo market in Atlanta is also entering a down cycle, according to Wammock, a development that will likely affect some of the mixed-use projects currently in the pipeline. Sales velocity in the condo market declined 23 percent since 2006, according to Marcus & Millichap.
