Atlanta Report:

Current Period Called ‘Unprecedented’ for Area Contractors.

By Natalie Keith

With low interest rates, positive job growth and other strong demographic trends, new development continues to flourish in Atlanta.

“The state as a whole is enjoying a tremendous amount of work,” says Mike Dunham, executive vice president of the Georgia Branch of the Associated General Contractors of America in Atlanta. “Contractors are experiencing an unprecedented time of opportunity.”

Despite some predictions of slowdowns in the condominium and office sectors, most officials are predicting that the good times will continue through the end of the year and the foreseeable future.

“All signs indicate that the construction industry will be strong through 2007 and even into 2008,” says Bill Anderson, president of Associated Builders and Contractors of Georgia in Atlanta. “It’s amazing how many new projects are being announced almost on a daily basis.”

The area’s positive economic prospects are especially fueling mixed-use projects, often in urban areas such as Downtown, Midtown and Buckhead, says Anderson.

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One of the more prominent of these projects under construction is 1010 Midtown, which is being built by Brasfield & Gorrie of Kennesaw, Ga. Work on the project’s $150 million first phase, which will include 443 condominiums and 35,000 sq ft of retail space, began in August. Subsequent phases, expected to begin construction later this year, will include more than 1.2 million sq ft of Class A office space, 500 hotel rooms, 600 residences and up to 150,000 sq ft of retail space.

Atlanta’s outlying areas are also seeing major mixed-use projects. Developer Grove Street Partners is planning an August groundbreaking on a $230 million mixed-use project that will bring 1.1 million sq ft of hotel, office and retail space to the Gateway Center near the Hartsfield-Jackson Atlanta International Airport in College Park. The development will include a 400-room headquarters hotel, a 150-room suites hotel, four Class-A office buildings totaling 468,000 sq ft and retail and restaurant outparcels totaling an estimated 75,000 sq ft.

Construction has started on a $200 million mixed-use project by developer Southeast Investment Properties of Alpharetta, Ga., called Sugarloaf Centre in Duluth. It will include a four-star hotel with 10 to 14 stories, a 45,000-sq-ft specialty retail center, five freestanding restaurants and a Class A four- to eight-story office building zoned for up to 225,000 sq ft.

Opus South Corp. of Tampa plans to break ground in the summer on a $300 million mixed-use project called Suwanee Gateway in Lawrenceville that will include 138 town homes, 340 apartments, 580,000 sq ft of office space, 360,000 sq ft of retail space, 14 retail outparcels and a hotel with conference center.

For many of the same reasons mixed-use development is strong, so, too, are the office and multifamily construction sectors. According to a fourth quarter 2006 Atlanta office market report by commercial real estate firm CB Richard Ellis, there were eight Class A office buildings with a total of 2.6 million sq ft under construction.

“While vacancy rates are still well above levels seen in the 1990s, the amount of office space under construction has risen significantly since the end of 2004,” the report states. “Between increasing tenant demand and a very attractive investment market for quality office product, speculative developers are eager to launch projects in Atlanta’s major office submarket.”

Among prominent office projects are Cousins Properties’ Terminus 200 project, a 22-story, 520,000-sq-ft building scheduled to open in mid-2009.

A joint venture of local developers that includes Pope & Land Enterprises, Duke Realty Corp., Post Properties and Novare Group is moving forward on 3630 Peachtree Road, a speculative $300 million office and condominium development at the northwest corner of Peachtree and Peachtree-Dunwoody roads that includes more than 400,000 sq ft of Class A office space. It is expected to break ground sometime this year.

High-profile condominium projects include the $250 million Sovereign condominium project at 3344 Peachtree St., the $115 million ViewPoint condominium tower at 855 Peachtree St. and the $54 million TWELVE Centennial Park condominium project, which is expected to be completed in the fall.

Also, Batson-Cook recently began work on the $51 million, 71-unit Astoria at the Aramore condominium project at 2277 Peachtree Road. The project is the third and final phase of the Aramore residential complex located in the Peachtree Battle neighborhood. Project completion is anticipated next spring.

The first two phases are sold out. The project, a joint venture of Atlanta-based Kairos Development and New York-based Real Estate Capital Partners, will include 28,000 sq ft of office space and 5,700 sq ft of street-level retail.

Sustainable?

While the level of activity in both the residential and office sectors continues to be strong, some question whether it is sustainable. “Developers in the condominium and office markets are being a bit more cautious,” says Steve Laux, executive vice president and area general manager for Skanska USA Building in Atlanta. “It’s not that there’s a glut of space; it’s just that developers are a bit more cautious, seeking to get anchor tenants before moving forward with projects.”

Others say that, although there has been a slowdown, it hasn’t mirrored what has happened in other areas. “There’s been some slowdown, but it’s not the same as it’s been in places such as Florida and California,” Dunham says. “Everything that was already in the pipeline has come to fruition.”

While expressing reservation with the condo and office markets, Laux and others were bullish on the hospitality sector due to Atlanta’s growing recognition as a tourist destination. Among projects that are helping to drive this image is the $96 million World of Coca-Cola Museum, which is being constructed by a joint venture of C.D. Moody Construction Co. of Lithonia, Ga., as well as Holder Construction Co. and Manhattan Construction Co., both of Atlanta.

With enhanced tourism, coupled with the city’s desirability as a destination for conventions and other business, hotel projects are gaining momentum.

For example, Barry Real Estate Cos. of Atlanta and White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide have reached an agreement to build a 28-story tower that will house the W Atlanta Downtown Hotel & Residences at 45 Ivan Allen Jr. Blvd. Work began in fall 2006 with the project expected to be completed in 2008.

Many projects, such as the $150 million Mansion on Peachtree Hotel project under construction by Holder Construction Co. and the $130 million Stanbury Hotel & Residences under construction by Bovis Lend Lease of Atlanta, combine hotel and condominiums. “We think hospitality will be a strong sector in the future,” Laux says.

The continuing influx of people to Atlanta is driving projects in the health-care and public sectors as well.

Choate Construction Co. of Atlanta is adding a floor to Newton General Hospital, while R.J. Griffin & Co. is the general contractor for the $88 million Children’s Healthcare of Atlanta at Scottish Rite. Bovis Lend Lease is completing the $73 million Emory Johns Creek Medical Center.

One of the largest public projects is the $210 million West Area Storage and Tunnel Facilities and Pumping Station, which Obayashi Corp. of Tokyo is constructing. The West Area Tunnel will have a storage capacity of 177 million gallons to provide underground retention of combined sewer overflow until it can be pumped into a treatment plant for pollutant removal and disinfection.

Another large project is the $101.9 million Greensferry Basin Sewer Separation, being constructed by a Smyrna, Ga.-based joint venture of Ruby-Collins, Reynolds and EPR. The project consists of separating approximately 174,000 ft of combined sewers in the Greensferry and McDaniel basins and the Stockade subbasin.

Activity at the Hartsfield-Jackson Atlanta International Airport is also strong. Among projects under way is the $170.5 million CONRAC Automated People Mover project under construction by Archer Western Contractors of Atlanta. The design-build project consists of the design, engineering, construction quality control, services, systems integration, testing and commissioning necessary to provide an operating automated people mover.

This project is just one in a 10-year, $6.8 billion program by the airport to meet anticipated growth.

Additionally, with Gov. Sonny Perdue’s introduction of the six-year $15.57 billion Fast Forward Congestion Relief Program in 2004, work in the transportation sector has also been steady.

One major project under way is the $147.4 million reconstruction of the Interstate 85 and State Route 316 Interchange, which C.W. Matthews began in December. The project includes two new flyover bridges, work on 11 other bridges, 23 substantial walls and the addition of HOV lanes throughout the interchange.