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It used to be that high-rise office buildings were the premier building projects, the most visible symbols of a community's economic vitality and regional or national status. The Empire State Building, Sears Tower, the Chrysler Building - all of these were icons of their times and places.
Today, it seems that office buildings have switched identities with condominiums as the iconic structures of their times. Whereas yesterday's condominiums were often drab and taken for granted, today's condos are often the biggest and brightest structures being built - and always with the greatest fanfare.
Consider Donald Trump, for example. In New York, his Trump Tower is a high-status office building. But in Florida, in Sunny Isles Beach and in Tampa, too, his most recent high-rise developments are residential.
Of course, much of the construction in the two areas has to do with their economic fortunes and the apparent demand for each. But is there something more that is driving these markets, something more psychological than purely economic?
For example, whereas some suspect South Florida's condo market is overbuilt - outpacing demand - is its office segment underbuilt? Likewise, is Atlanta's rejuvenated office market, which has a double-digit vacancy rate, being overbuilt? Or are other trends driving development in face of that glut of space?
Those and other questions are raised from Southeast Construction's reporting on the office market in this issue, with our focus on activity in two of the region's hottest overall markets, Atlanta and South Florida. While South Florida and especially Miami have become synonymous with high-rise condos, and Atlanta has a more business-oriented personality, the numbers underlying the current level of office construction activity in these markets are still curious.
For example, even though Atlanta is clearly showing more office construction activity presently than South Florida, its vacancy rate, now estimated at about 15 percent, is still generally regarded as being much too high a number to generate new projects.
In contrast, the South Florida cities of Fort Lauderdale, Miami and West Palm Beach have showed improvement and ranked in the top 10 of an annual national index of forecasted revenue growth for offices, published by Marcus & Millichap.
This index reflects vacancy and demand for office space. (In fact, Fort Lauderdale placed first in the nation.) Meanwhile, Atlanta stagnated, and remained in the 32nd position for the second year in a row, due to its double-digit vacancy rate.
In South Florida, our writer Jennifer LeClaire found that condos had simply taken all of the hot spots. "In Downtown Fort Lauderdale there is actually no office construction slated, proposed or available at all," said Nicole Coyle, assistant director at the Fort Lauderdale offices of Studley, a national commercial real estate firm focused primarily on tenant representation and advisory services.
"There is simply no available land. The available land that did exist a couple of years back was repurposed for condominiums because of the high residential demand throughout South Florida."
Meanwhile, our Atlanta correspondent Chuck Green reported that the Atlanta office market had the largest concentration of office space in the Southeast United States with an inventory of 163 million sq. ft. Green got his information from Ackerman & Co., an Atlanta-based commercial real estate firm, which also reports on its Web site that as of December 2004 the office vacancy rate was just over 19 percent.
Even so, construction has begun on 16 buildings delivering more than 900,000 sq. ft. to the Atlanta market, the website stated.
Various factors are helping spark this rejuvenation. Despite a slowdown in job growth, the Atlanta area continues to attract about 100,000 people annually and remains recognized by consultants as a top five place to do business.
Additionally, at the beginning of the year, in a poll of its database of leading national site consultants to identify the hottest places for business expansion and relocation by Expansion Management magazine, Atlanta came in second behind Nashville.
Furthermore, in a 2004 UHAUL National Migration Trend Report, released in April, Atlanta led the pack for the fourth year in a row as a "top destination" for movers, substantiating Atlanta's popularity among newcomers.
That's not all. According to Conway Data, metro Atlanta also is being considered as a top 10 place in attracting new business and investment - reaping a notable share of national business activity. Metro Atlanta also was ranked sixth by Site Selection magazine in terms of receiving the most expanded and new facilities last year. For 2004, the area ranked eighth with $1.7 billion in new facility investments.
Of course, there's more to this story. For the Southern Co. Center @ Allen Plaza project reported on in this issue, the Southern Co. simply had come to the end of its lease and was looking for a better home. Its choice of a build-to-suit project - with less space but improved amenities and security features - perhaps represents another trend driving current developments.
In short, with today's office - and condo - development, it may be as much about perception as reality. Then again, maybe it's always been that way with all types of high-rises. We invite you to read on for further insights about this curious market.
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