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Atlanta Gets a Makeover:
More Up, Less Out

By Jennifer S. Forsyth
From The Wall Street Journal Online
The city that built out wants to build up.

Atlanta has long been linked to sprawl and traffic jams. Now several huge mixed-use construction projects seek to remake the city's landscape. The new developments aim to create neighborhoods in Atlanta as swank and walkable as some sections of New York and Chicago with easy access to nearby office jobs, chic restaurants or fashionable boutiques. If successful, the physical and cultural shifts could serve as a blueprint for other cities.

A few weeks ago, two big names in real estate announced a massive development project in the Midtown area of Atlanta. Spanning three city blocks, the project, dubbed 12th & Midtown, will offer office space, two luxury hotels, high-rise condominiums and pricey retail shops in the $1.1 billion initial phases. With hopes of luring high-end European fashion houses, developers Selig Enterprises Inc. and Daniel Corp. are pitching the project as a part of "Midtown Mile" -- a 14-block stretch of Peachtree Street that city fathers hope will resemble Chicago's Michigan Avenue in look and feel.

And that's just one of at least six multimillion-dollar projects with similarly ambitious goals under way in the urban core here. Other large projects include the $1.95 billion Allen Plaza on the edge of downtown, $225 million Peachtree Pointe on the northern edge of Midtown, as well as at least three in the upscale Buckhead area. All of these come in the wake of the success of the $3 billion Atlantic Station -- a former polluted area at a factory where barrel hoops were made -- that has been converted into a mini-city of office space, national retail chains, apartments and condominiums.

Though the suburbs are in no danger of emptying, demographers are finding demand for urban residences. Young professionals flooding Atlanta for employment are being joined by "empty nesters" whose children have grown and moved out and by others who have finally had their fill of the long commutes from the outer ring of suburbs. Developers say they are seeing similar trends in other Sunbelt cities, including Charlotte, N.C., Tampa, Fla., and Dallas. It's part of a movement toward downtown living that's happening in many places across the country.

Of course, Atlanta already has a dramatic skyline, as developers have been building office skyscrapers here for decades. But until very recently, there were hardly any residential towers much less the kinds of mammoth mixed-use developments that are now sprouting across the three main urban markets of downtown, Midtown and Buckhead, a high-end neighborhood north of midtown.

Urban living is being prodded by business and political leaders here in hopes of easing gridlock in the face of a continued population surge. In Buckhead, the state transportation department is using about $37 million in federal funds -- as well as contributions from the local business district and the city -- to redesign Peachtree into a boulevard with wider sidewalks and a tree-lined median.

For much of the city's modern history, a walkable Atlanta seemed a contradiction in terms. Some of the nation's first suburban office parks were built in the rings around Atlanta. "For the longest time, this city was like a doughnut. Nothing happening downtown. Everything happening in the suburbs," says Hal Barry, chairman of Barry Real Estate Cos., an Atlanta developer. But over the past four years or so, the mind-set changed, in part due to exasperation over long commutes, says Jeff DuFresne, executive director the Atlanta district council of the Urban Land Institute, a not-for-profit think tank. Among the nation's large metro areas, Atlanta is ninth in population but its residents had the fourth-longest average commute -- 31.1 minutes, according to a 2005 survey by the U.S. Census Bureau.

"Because we all love our cars, we find ourselves sitting in them all too often," says Kerry Armstrong, senior vice president of the Atlanta office group for Duke Realty Co., an Indianapolis-based real-estate investment trust that is one of four firms involved in a $300 million mixed-use project in Buckhead called 3630 Peachtree.

Another contributor to the change: the number of college-educated young adults ages 25 to 34 increased 46% in the '90s, the fifth fastest rate of the 50 large metros, according to a recent study commissioned by the Metro Atlanta Chamber of Commerce. A survey of that group showed that young adults were unhappy with the lack of round-the-clock activity downtown.

Barry Real Estate Cos.' Allen Plaza is poised to capitalize on that demand. The developer lured the electricity giant Southern Co. to a new corporate headquarters. The accounting firm of Ernst & Young took space in a second tower, and a third planned tower, with 46 stories, will be the tallest building to be built downtown in a decade. The complex also will house two hotels, and Post Properties, an Atlanta-based real-estate investment trust, is teaming up to build apartments in yet another tower for the complex.

The projects offer different types of "mixed use." In two of the Buckhead projects -- 3630 Peachtree and 3344 Peachtree -- luxury condos are being stacked on top of more than a dozen floors of office space, guaranteeing buyers a view of the city lights. By contrast, another Buckhead project, the $660 million Terminus complex (in reference to Atlanta's original name) is separating the different real estate activities into silos.

Overbuilding is a risk. "It's a city in a perpetual state of boom," says Keith Pierce, director of research for greater Atlanta, for CB Richard Ellis, a real-estate services firm. But recent absorption -- the change in the net amount of occupied space -- has been strong enough in the city's office market to justify new construction, despite a relatively high vacancy rate, adds Duke Doubleday, senior vice president for brokerage at Atlanta-based Ackerman & Co.

The condo market has been bumpy recently, but hasn't halted. While sales in the city center dropped by 43% from 2005 to 2006, the former was an aberration and 2006 sales were in line with the seven-year average, according to Haddow & Co., Atlanta-based real estate consultants. Nonetheless, condominium inventory is considerably higher than in previous years and developers are hoping that strong growth in the Atlanta market will fill all those units.Two million new residents are expected to move to the Atlanta area in the next 25 years -- which is roughly equal to most of the population of Nevada being placed here.

Email your comments to rjeditor@dowjones.com.
-- January 11, 2007