By Clinton McKellar, Director, Office Tenant Representation
As we turn the page on 2017, it is the perfect time to reflect on how Atlanta’s loft office market has evolved since it was announced that Jamestown was buying City Hall East way back in 2011 and the BeltLine was still in the planning phase.
Next time you take a stroll down the East Side Trail and stop into Ponce City Market for a coffee or a beer, think how far Atlanta has come in just six years. David Cummings had not even sold Pardot to Salesforce and a largely vacant Ivy Place sat on the corner of Piedmont and Lenox Road.
In 2011, Jamestown may have been the only one in town who knew what they had just acquired. And it’s hard to imagine that even they knew that Ponce City Market would be a home run that long ago. Jamestown signed their first lease with AthenaHealth in 2013. AthenaHealth’s HQ in Watertown, Massachusetts, is a giant brick building that was converted from a weapons manufacturing facility in World War II to their corporate campus. How fortunate for Jamestown and Atlanta that the first tenant to show up their door already knew the opportunity that Ponce City Market presented.
The rest is history as a who’s who of cool companies showed up next: Mailchimp, Industrious, Google, General Assembly, Twitter, How Stuff Works, and more all decided to make a long-term commitment to Ponce City Market and have created countless jobs for Atlanta.
When David Cummings purchased Ivy Place in 2012 and laid out his plan for a 100,000-square-foot tech incubator, many thought he was crazy. Five years and a giant renovation later, Atlanta Tech Village is still full with a waiting list and incredible companies like SalesLoft, Terminus, Calendly and Bitpay on their resume of graduates who have also created hundreds of jobs for Atlanta.
The success of Ponce City Market and Atlanta Tech Village were two of the major catalysts for the emergence of Atlanta’s loft office boom. Jamestown proved the demand was there and Atlanta Tech Village and ATDC have consistently produced high-growth companies who are great targets for owners of loft office space.
At the end of the fourth quarter of 2017, Atlanta now has over 7 million square feet of loft office space, which has doubled in just the last two years. Large scale redevelopment projects like Armour Yards in South Buckhead, Ellsworth Lofts in West Midtown and Defoor Hills on the Upper Westside were acquired, redeveloped, leased up and sold in just the last two and half years.
While startups and the millennial workforce are strongly drawn to the high ceilings, brick-and-beam construction and natural light that loft office offers, 2017 saw corporations like Coyote Logistics and Reliance Worldwide trade in their traditional office space for open plan loft office space in an attempt to create a work environment appealing to employees across the age spectrum. With interest in Atlanta’s loft office product coming from well-established corporate America, institutional investors will continue to chase loft office’s higher returns than would typically be seen in the traditional Class A office market.
As the institutional investors become more comfortable with loft office and the millennial workforce inches closer to a majority, expect to see more warehouses converted to loft office in 2018. Because the secret is out, the purchase price for convertible warehouses is through the roof, which means the rental rates for tenants will only continue to increase.
Atlanta should be very thankful to pioneers like Jamestown and David Cummings for taking the risks they took in the last six years. Without them, the city would look very different.
This blog was originally published on EvolutionCRE.com.
Clinton McKellar is a director in Cushman & Wakefield’s Office Tenant Representation Services Group, joining the firm in 2011. Mr. McKellar’s experience encompasses a variety of assignments including acquisition, disposition, relocation, consolidation and sublease services.