An iconic, albeit financially stressed, series of downtown Atlanta office towers has had a busy start to 2024.
Peachtree Center, which consists of six office towers and a mall, landed four office leases during this year’s first quarter, including one new tenant, said Transwestern Real Estate Services, the leasing agency for the complex. The leases total more than 83,000 square feet of office space within the 2.5 million-square-foot complex, which went through a high-profile foreclosure in 2022 that was seen as a potential bellwether of forthcoming loan distress in the office sector.
Peachtree Center’s future has been murky since going into foreclosure.
The office market is struggling to recover from the upheaval prompted by the COVID-19 pandemic, especially in downtown. Peachtree Center has seen its appraisal value slashed to about $155 million despite having $115 million of distressed debt. And the complex has a new special servicer, Torchlight Financial Services, to oversee the properties’ post-foreclosure future.
Despite the uncertainty, Peachtree Center is starting to forge a potential path forward. Chip Roach, Transwestern’s senior managing director of agency leasing in Atlanta, said his team is aggressively marketing available offices to prospective tenants while leaving one tower, 225 Peachtree, vacant in case a developer wants to acquire and convert it into apartments.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
“Peachtree Center continues to shine as one of Atlanta’s most attractive and dynamic downtown office destinations,” he said in a news release. “We’re pleased to see strong interest from current and prospective tenants.”
Converting aging towers has garnered attention since the pandemic left many business districts flooded with unwanted office space. Taking one of Peachtree Center’s towers out of the office market could not only extend its viability but add life to the Peachtree Street corridor while concentrating tenants at the other buildings, stabilizing the entire development.
Omitting 225 Peachtree, the complex’s office occupancy ended March at 52%, roughly the same as the entire six-tower complex was in early 2022 before its foreclosure. Last year, Transwestern completed nearly 154,000 square feet of leases at Peachtree Center, signaling some building momentum for the skyline-defining towers.
Of the new signings, Burke Moore Law Group opened a new 7,742-square-foot office within Peachtree Center. Existing tenants U.S. Nuclear Regulatory Commission, Robert and Co., and Atlanta Neighborhood Development Partnership renewed leases for 54,303 square feet, 15,987 square feet, and 5,049 square feet, respectively.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
A record amount of unwanted office space is currently on the market in metro Atlanta, according to real estate services firm CBRE, and downtown’s office market has been among the slowest to recover from the pandemic.
During this year’s first quarter, Atlanta’s office market experienced about 1.5 million square feet of negative absorption, an industry term for whether a market is growing or shrinking. Downtown accounted for more than half of that negative absorption.
Despite those challenges, some real estate analysts are optimistic about downtown’s prospects. Dale Lewis, senior vice president with CBRE in Atlanta, said downtown developments are beginning to gain momentum, such as the $5 billion Centennial Yards project near Mercedes-Benz Stadium and a new ownership group taking over an initiative to revitalize 10 blocks of South Downtown.
“Along with all of these initiatives, we also have the World Cup coming in 2026, which gives us additional leverage and time pressure,” Lewis said. “All in all, I believe Downtown has an exciting future.”
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