'Everything's Empty' As Remote Work Impacts Central Perimeter Hotels
Atlanta’s hotel market has faced headwinds in 2024 so far, but those have been blowing at a gale force for hoteliers in Central Perimeter.
The Central Perimeter submarket north of Atlanta is a corporate hub, with more than 25M SF of office space home to such Fortune 500 headquarters as UPS, WestRock, Newell Brands and Intercontinental Exchange. Earlier this week, automotive retailer Asbury Automotive, another Fortune 500 company, announced it was buying an office building in Central Perimeter for its headquarters.
That corporate presence has worked against the hotels in the area, many of which were developed to cater to business travel, panelists said during Bisnow’s Atlanta Retail and Hospitality Conference last week.
"All the hotels are empty. The mall is empty," Hunter Hotel Advisors CEO Teague Hunter said onstage at the Grand Hyatt Buckhead. "Everything's empty."
Central Perimeter is Metro Atlanta's largest business district outside of the city proper, spanning two counties and three suburban cities. The flow of office workers has been the lifeblood of much of the retail, restaurants and other businesses in the area over the decades.
But office attendance, while slowly increasing, has been spotty since the pandemic. CBRE Senior Vice President Amy Fingerhut said at the event that up to 60% of the office buildings are occupied daily in recent years.
State Farm, the district's largest employer with 5,000 workers, switched to a hybrid work model in 2021. It leases a three-building office campus overlooking Interstate 285, and its employee's infrequent presence at the campus has hammered not only Central Perimeter hotel performance but sales prices as well, Hunter said.
"You can all see and touch and feel a giant billion-dollar new office building. It's empty. When are they coming back? Who knows?" Hunter said. "I guess if you're an insurance company, you don't need people to come back."
Hotels in Buckhead, Midtown and Downtown are charging an average daily rate of $193 per night, according to data compiled by Colliers, while Central Perimeter hotels charge an average of $115. Central Perimeter hotel ADR was $123 in 2019, according to CoStar data obtained by Bisnow.
Legacy Ventures CEO David Marvin said performance at the Hyatt Regency Atlanta hotel — the $48M full-service hotel that is part of the Perimeter Summit office park — “tanked” as well because of remote work. Legacy developed the project on behalf of an affiliate of General Electric Pension Trust in 2013 but has no ownership or operational interest in the property, Marvin said.
The Hyatt Place Atlanta Perimeter hotel, which Legacy owns, is faring only a little better, Marvin said.
“We're not doing great, but we're buoyed by the fact that we have the additional demand generator of being within walking distance of Saint Joe's and Northside Hospital, Children's Hospital,” he said.
The impact on hotel performance is taking a bite out of values, too, Hunter said.
An affiliate of Starwood Capital Group paid $50M for the 275-room Le Méridien Atlanta Perimeter upscale hotel across from Perimeter Mall in Dunwoody before the pandemic, then marketed it for sale. Hunter said Starwood received offers for upwards of $58M but decided not to sell.
Earlier this year, with a $30M Bank of America loan coming due, Starwood unloaded the hotel for $22M to Ohio-based Whitestone Cos. Le Méridien's precipitous value decline is a common story in Central Perimeter, Hunter said.
Atlanta’s hotel market overall has stagnated over the past year. Occupancy rates dropped nearly 2% year-over-year and are 5.5% below pre-pandemic levels, while revenues per available room fell 3.4% over the past 12 months, according to a third-quarter Colliers report.
While Metro Atlanta hoteliers saw slower growth due to lagging business travel and a drop in leisure activity, a surge in convention activity coupled with Atlanta hosting eight of the World Cup games in 2026 has experts hoping for occupancy and rate improvements in the coming years. Big group events are already helping to keep Downtown Atlanta hotel rooms full, Marvin said.
“Downtown hotels are famous for killing each other on the rate. The rate is suffering, but the occupancy is there,” he said.
Peachtree Group Chief Investment Officer Brian Waldman said his firm’s select-service hotels in the northern Metro Atlanta suburbs are performing well despite the overall hospitality malaise.
“We have moved to Lawrenceville. We have a couple of hotels up in Kennesaw. I mean, those are some of the best stories in our portfolio right now,” Waldman said. “Those hotels are performing really well. I think it's having the right product in the right location. We feel really good about all of our stuff.”
