Studies: Mass Transit Driving Atlanta Office Development

ATLANTA, GA—More than half of the new office construction in Atlanta is being developed close to the MARTA mass transit lines, according to a new report by Cushman & Wakefield’s research team.

At the same time, a study by Transwestern suggests that Atlanta’s overall percentage of transit-accessible office inventory is slightly below the national average, coming in at 33 percent of all office space, or 71 million square feet. The average rent for these buildings was $27.44 per square foot, triple net, at the end of the first quarter, about seven percent higher than the average for metro Atlanta.

Transwestern’s research looked at transit-accessible buildings within a ten-minute walk from a subway, commuter rail or light-rail facility in markets including Atlanta, Boston, Chicago, Dallas, Denver, Houston, Los Angeles, Miami, Minneapolis, New York/New Jersey, Phoenix, San Francisco, Seattle, St. Louis and Washington, DC, while the Cushman & Wakefield study examined just Atlanta-area properties close to MARTA.

“As transit becomes increasingly important for Atlanta office users, we are seeing vacancy in transit-accessible properties average 30 percent below other properties, allowing those owners to achieve higher rents,” says Keith Pierce, Transwestern’s Southeast director of research. “And, almost every major new development underway is taking transit into consideration.”

MARTA drives $1.4 billion in annual economic activity and supports nearly 25,000 jobs, according to the Cushman & Wakefield report.

You can hear the complete audio interview with Chad Koenig of Cushman & Wakefield in the player below.

The Cushman research grew out of an assignment the company completed about five years ago for a company relocating its headquarters, according to Chad Koenig, senior director, office representation services.

“As the project developed, they realized that the workforce was shifting,” Koening says. “They wanted to be able to track some of the younger talent, so it went from, ‘let’s look at Buckhead and the Central Perimeter,’ and became ‘let’s find a location that is accessible to MARTA.’”

That engagement led to the development of an 80,000 square foot “boutique” office building at the Chamblee MARTA station, Koening says.

“There’s a trend where companies are starting to move in close proximity to MARTA stations, so they could access talent that live in town, and wanted to not have to get in a car to come to the office,” he says.

The firm started inventorying office space walkable to MARTA and got a nice surprise.

“If you do a half mile radius around those MARTA stations, which is about a 10 minute walk, there’s a little over 80 million square feet of office space,” he says. “That’s almost three times the size of our largest office submarket.”

What’s more, Atlanta doesn’t suffer the same resistance to reverse commuting sometimes seen in the Northeast, where employers are reluctant to ask city-dwelling employees to commute out of the central business district into suburban office space.

“Even with the attraction for companies to move in town, have an intown presence, the suburbs aren’t hurting,” Koenig says. “North Fulton, which is one of our large office suburban office markets, is doing very well. Rental rates in North Fulton have continued to move up over the years. The top of that market four years ago, five years ago, was $21 a (square) foot, full service. Now those same buildings are $28 a foot.”

Among Cushman’s findings:

• On the office side, roughly 61% of all new construction is within one-half mile of a MARTA station, and all these projects are high-end, class A developments;
• Average office rents within a half-mile of a transit station totaled $29.42 in the first quarter, up 5.1% year-over-year and 24.8% higher than the overall Atlanta market;
• Over the past decade, the number of new residential units within the MARTA market was more than triple the inventory growth of non-MARTA market locations, and when demand is this strong, multifamily developments near rail stations are able to achieve rents nearly 50% higher than those outside the half-mile radius.
• Finally, the research showed that effective 2018 rents within the MARTA market average $1.68 per square foot compared to non-MARTA market multifamily average of $1.14 per square foot.
• Today, new construction properties in the most active and desired submarkets have reached above $2 per square foot, as they are predominantly class A developments with exceptional amenity packages and unit features.

“As workplace amenities have become increasingly important to companies in attracting and retaining talent, tenants are most certainly keeping accessibility to mass transit on their radar when surveying office product,” says Brian Landes, director of GIS/Location Intelligence for Transwestern. “Not surprisingly, vacancy for transit-accessible buildings is lower than overall vacancy, which makes these buildings extremely attractive to commercial real estate investors.”

Cushman & Wakefield’s Koenig has seen the change in demand for mass transit, too.

“Five years ago, it really wasn’t something that was requested by our office users, that need to be near MARTA,” he says. “In today’s age, when we’re looking at a submarket that has MARTA, it goes to the top of the list. The company is like, ‘we’ve got to be able to have this, even if it’s 10% or 20% of our workforce that’s going to take MARTA.’”