The last thread was archived have far exceeded the 2000 post limit.
Duke, Pope & Land Going Spec on Buckhead Office
August 31, 2006
Written by Bailey Webb
CoStar Group
Duke Realty Corp. (NYSE: DRE) and Pope & Land Enterprises -- as well as Novare Group and Post Properties (NYSE: PPS) -- have a schedule to keep for the 3630 Peachtree Road mixed-use development, and they’re not going to let matters such as preleasing get in the way.
Construction is planned to start on the twin-tower office/condo/retail/apartment development in late September or early October. 3630’s 39-story South Tower will include 442,000 square feet of Class A office space as well as 84 Post condominiums in its upper reaches. Novare will develop the property’s 29-story North Tower, which will have 200 condominiums averaging approximately 1,700 square feet and deliver two months after the office space.
Of course, Duke and Pope & Land and the residential development partners have a 28-month schedule, and developers throughout Atlanta are banking on a big 2008 and 2009 leasing cycle, as tenants who leased large blocks of office space during the late 1990s development boom re-evaluate their office needs. Developers also are banking on continued organic, white-collar job growth for Buckhead, especially in financial services.
On the flip side, Duke and Pope & Land will compete with Cousins Properties’ (NYSE: CUZ) 450,000-square-foot Terminus 200 office building, which is slated to break ground next spring, and Regent Partners’ 491,000-square-foot 3344 Peachtree building, which is under construction and has no preleasing to date, according to CoStar information. Cousins’ Terminus 100, a 27-story, 581,874-square-foot Class A tower, is slated to deliver in April 2007 and is 65% pre-committed, according to Cousins.
“(Buckhead’s) probably the strongest office market in the city right now,” said Larry Kelly, president of Pope & Land. “It’s an extremely active market now for tenants looking at ’08 and ’09.”
Buckhead closed the first half of the year with 14.1% vacancy (15.4% for Class A space) and approximately 55,000 square feet of negative net absorption, according to CoStar information. While Buckhead net absorption has been flat or negative since the first quarter of 2005, quoted rates have increased from $23.61 to $24.79 across all classes of space, with asking rents for Class A office space at $25.74 at mid-2006. The submarket currently has about 1.3 million square feet of office space under construction, which includes Terminus 100 and Regent’s new building.
Outside of timing, Duke and Pope & Land’s spec move raises other questions. Why would a publicly traded developer/owner start a speculative office development in Atlanta immediately after two of the biggest publicly traded office owners, Equity Office Properties Trust (NYSE: EOP) and Trizec Properties (NYSE: TRZ), announce plans to leave town? How will Duke fare in its first foray into inside-the-perimeter office development? Duke executives referred all media calls to Pope & Land, so we never had the chance to ask them directly.
With Trizec, Blackstone Group acquired its Atlanta portfolio and then flipped it to New York-based Tishman Speyer, a global giant in commercial real estate. The deal, reportedly valued at $675 million or $200 per square foot, includes Trizec’s 3.5 million-square-foot Atlanta holdings and the site for the proposed Two Alliance Center in Buckhead.
EOP also wants to take advantage of a hot office sales market -- the company wants to sell $3 to $3.5 billion of its assets across the U.S. by the end of 2007 -- and took a beating with its woes at 191 Peachtree St., which is currently under contract to Cousins for $127 per square foot. That said, no one expects the remainder of the EOP portfolio to linger on the market, and it should draw intense interest from institutional investors, Kelly said.
As for Duke, REIT analysts generally gave positive feedback on the Buckhead mixed-use partnership.
Wachovia Securities’ Christopher Haley noted the positive momentum and outlook for mixed-use development, a quality site and an attractive land basis (Pope & Land has owned the land for 20 years). Greenstreet Advisors’ Jim Sullivan called it a “somewhat odd” deal for Duke given its lack of urban/CBD development experience in the market -- Duke has extensive urban office development experience in Indianapolis and Cincinnati -- but applauded the company’s partnership with a talented local developer like Pope & Land and Duke’s overall capital-allocation decision making.
“Cousins' leaseup at Terminus is encouraging, and the number of buildings changing owners may shake out some tenants for Duke,” Sullivan said. “While the project carries some sizable risk, the potential rewards may make it worth pursuing.”
Prev
Though this is the same rendering, when you drive up there besides the renderings, it looks much better than this does. It is more detailed and I don't think a camera could capture the redering any better. I think this would be great at the corner of 10th and peachtree, or at the corner of piedmont and peachtree where The Container Store is located. This will be Novare's most modern high rise condo built. Too bad its not in the heart of Buckhead, though from certain viewpoints it will look like it, or Midtown, cause it would've been a great addition here also.
Linear Mode
