November 7, 2014
How Another Impressive Transaction Shows That Buckhead Is Back
Atlanta Business Chronicle
A few years ago investors wouldn't touch Buckhead. Today, it may be difficult to find a hotter office market in the Southeast.
Parkway Properties Inc. (NYSE: PKY) announced Oct. 30 it reached an agreement to purchase One Buckhead Plaza for $157 million.
At almost $340 a foot, the tower's acquisition price is notable. Buckhead office towers such as 3630 Peachtree ($390 per foot) and 3344 Peachtree ($346 per foot) have also fetched impressive numbers, according to data compiled by Cushman & Wakefield. (Note: The Chronicle's list of trophy sales on 20-A sources unofficial market data provided by developers).
Real estate investment firm Heitman bought 3630 earlier this year, setting the Buckhead record.
One Buckhead Plaza continues that momentum. Metzler Real Estate put the tower on the market earlier this year.
The building, at the intersection of Peachtree and West Paces Ferry roads, currently features asking rents in the high $20s per square foot, according to market data. As Buckhead's office market has tightened, though, it's possible Parkway can eventually push rents at One Buckhead Plaza to well over $30 a foot, leasing and development executives said earlier this year.
David O'Reilly, Parkway Properties' chief financial officer, recently told Wall Street analysts One Buckhead rents are still 20 percent below market rates.
"Additionally, there has been a recent increase in demand for resale space within the Buckhead submarket that has driven rates higher, which we believe we can capitalize on," he said in an earnings call with analysts.
Jayson Lipsey, Parkway Properties' chief operating officer, added "We think we can continue to drive rate growth at this building certainly in excess of where it is today."
Almost a decade ago, Crescent Real Estate Equities Co. purchased One Buckhead Plaza for $130.5 million, or about $320 a foot, according to Cushman & Wakefield. Metzler later took the majority stake in the property. It chose Eastdil Secured to oversee its sale this year.
Buckhead has come a long way in regaining investor confidence.
Four years ago, The Wall Street Journal's article about Atlanta's "Irrational Building Exuberance," punctuated by four spec towers under construction in the depths of a recession, was the buzz of the city's real estate circles. Vacancy was almost 30 percent in 2010 after the spec office buildings 3630 Peachtree, Two Alliance Center, Terminus 200 and Phipps Tower were completed.
It took steep concessions, but those towers have filled up. Buckhead Atlanta, the turnaround of the stalled Streets of Buckhead mixed-use project, has started opening new stores. New apartment towers are rising along Peachtree and others are planned for the Buckhead Village.
Now several years into the recovery, rents are soaring, and only one Buckhead office tower is underway, Tishman Speyer's Three Alliance Center. The 30-story building is still almost two years from completion.