Want To Solve Central Perimeter Office Vacancy? Take A Hike

Owners of the 31M SF of office space in the Central Perimeter submarket should take a lesson from Atlanta's once-premier neighborhood, a panel of commercial real estate experts said during Bisnow's Expanding the Perimeter event last week.

Build better pedestrian infrastructure now, or get left behind

“Buckhead was for a long time the gold standard of real estate values in Atlanta. The highest office rents, highest apartment rents, highest home sales,” Coro Realty Advisors President Robert Fransen said. “If you look at Buckhead now, it’s really none of those things anymore.”

“Office rents are higher in the Old Fourth Ward. Retail rents are higher in Midtown. Apartment rents are higher in West Midtown,” he added. “What all of those things have that Buckhead does not is the walkability piece.”

Central Perimeter, which spans DeKalb and Fulton counties and encompasses the cities of Brookhaven, Sandy Springs and Dunwoody, has been one of the biggest economic engines of the metro area. But its sprawling growth over the decades meant that commuters needed to travel around by car, a feature that has tarnished the submarket’s appeal for young workers and, by extension, companies looking to attract that workforce. 

“The more walkable the Perimeter market gets, the more attractive the office market is going to become,” JLL Executive Managing Director Adam Viente said onstage at the High Street development in Dunwoody.

Viente and others highlighted how the Atlanta BeltLine and the sidewalk system in Midtown have helped propel that submarket into one of the city’s premier real estate markets. 

“You can pick any part of Midtown, [and it] is getting the highest rates in the city,” Viente said. “It's because of their walkability.”

The various jurisdictions in Central Perimeter have been exploring ways to improve pedestrian flows, which has been shown to improve a community’s economic vitality.

Dunwoody Mayor Lynn Deutsch said the city is focused on building pedestrian trail systems that would eventually connect to the Atlanta BeltLine and paths in Buckhead. Sandy Springs City Council Member Jody Reichel said her city is in the process of creating a 5-mile pedestrian loop that would also connect to those markets.

But getting to the offices in Central Perimeter requires a vehicle for the vast majority of local workers, a reliance that may be hampering the area’s office market.

Behind Buckhead, Central Perimeter has the highest office vacancy rate in Metro Atlanta at 24.8%, according to Colliers' first-quarter office report. But in Midtown, which benefits from the popularity of the BeltLine and the numerous walkable developments that have sprung up along its path, office vacancy was 21.7% in the first quarter, according to Colliers. 

RocaPoint Partners principal Phil Mays said better pedestrian pathways connecting developments like the State Farm campus to High Street, Campus 244 and Perimeter Mall would boost consumer spending by keeping people in the submarket longer each day.

“The point that someone is getting in their car from the office building, they're not heading over to the mall or High Street or [Campus] 244 or wherever. They're heading home,” said Mays, whose firm developed the mixed-use Halcyon in Forsyth County and the Campus 244 project in Dunwoody. 

“Walkability is solvable,” Viente said. “And I think if you solve for that, Perimeter all of a sudden becomes the premier submarket in Atlanta. I truly believe that.”

Panelists also said Central Perimeter needs more housing, particularly multifamily, which is often eschewed by local leaders. Sandy Springs Mayor Rusty Paul has been a staunch opponent of building new apartments.

But more housing, specifically multifamily, will lure in more workers, which in turn will lure more companies to Central Perimeter’s vacant office spaces, Fransen said. 

“No one's going to lease an office space because there's an Ulta next door. But if you have restaurants and convenience retail … that typically follows residential. And then, in turn, that makes it easier to lease the office space,” Fransen said. “Specifically multifamily. A single-family subdivision is not a needle-mover for retail.”

Deutsch admitted that approving dense residential projects is a difficult hurdle in Dunwoody, but she said it would be possible if developers offered more housing that was attainable to more households.

Deutsch specifically cited the need for more duplexes and other forms of “missing-middle” housing, including offering for-sale products that are more affordable for first-time homebuyers.

“I think I can convince my council to give you more density if you come up with something different,” Deutsch said. 

“I speak for mayors across the country when I tell you approving housing, it can also be uncomfortable,” she added. “So if you’re asking us to do something difficult, we’re asking you to be innovative and creative. Give our residents the opportunity to be homeowners by building a product that might be remotely obtainable.”