"It's a very solid asset, class A mid-rise office building with structured parking right in the heart of Buckhead, which is the most appealing submarket for office product in Atlanta," Jeff Hanson, president and chief investment officer of Grubb & Ellis Realty Investors, tells GlobeSt.com. He adds that part of the building's appeal is its proximity to Lenox Square Mall and the Ritz Carlton Hotel, among other high-quality lodging options.
One Live Oak, which opened in 1982, was also attractive to the buyer because of the historical performance of the asset, which has consistently maintained high occupancy and solid credit tenants, says Hanson. The building is currently 92% leased, with anchor tenants including the Securities and Exchange Commission and the University of Georgia Real Estate Foundation Inc. Rental rates at the building range between $24 and $25 per sf.
According to a second-quarter Marcus & Millichap report the Buckhead/Lenox submarket currently has an 11.8% vacancy rate and the highest rents in the Metro Atlanta area at $23.35 per sf, a 4.1% increase from the same time last year. The submarket is also expecting 625,000 sf of inventory this year, which may cause a rise in the vacancy rate to the mid-13% range, says the report.
The five new buildings under construction in the Buckhead area did create a challenge during the marketing of One Live Oak, says Hayes Swann, managing director with DTZ Rockwood, which represented the seller in the transaction. However, he says, there was very strong interest in the property, with about 130 confidentiality agreements returned. "It's an A-plus location that will stand well during good times and bad," Swann says.
G&E is confident that the new product being delivered in Buckhead will not prove a difficult obstacle for One Live Oak. "The vacancy that is going to occur with the onset of the new product being delivered is going to be within that ultra-core, class A product that has a cost basis associated with the [newly] developed product," says Hanson. "All those buildings will be asking $10 [per sf] more per year than what tenants could occupy our building with. Our rent roll is deeply conducive to maintaining most, if not all, of our tenant base and continue to attract like kind tenants."
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