Third & Urban's Next Steps: Building New Apartments, Converting An Old Paper Mill
A prolific adaptive reuse development firm in Atlanta has its sights set on a historic paper mill for its latest project.
But after transforming a number of old warehouses and other buildings into creative loft offices, breweries and retail throughout the Southeast, including Armour Yards, Third & Urban plans to shift its focus to building ground-up apartment buildings next to its commercial projects.
“The opportunities right now are the adaptive reuse facilities with excess land,” Third & Urban Managing Partner Pierce Lancaster said in an interview. “We have a core competency in placemaking. For years we have watched residential development sprout up around Jamestown's commercial projects or our own commercial projects. With our projects now at Third & Urban, we're seeing the same trends.”
Third & Urban's latest project will start with the spec redevelopment of the former Westrock production campus — a 246K SF collection of single-story brick warehouses formerly used as printing plants — into a mixed-use project called Westside Paper.
After that, the developer is eyeing other commercial real estate projects on 6 unused acres of the Westside Paper property, located off West Marietta Street, Lancaster said. Third & Urban also is eyeing a number of new multifamily projects that would connect to its existing adaptive reuse portfolio in the Southeast.
Third & Urban filed permits last month with the city of Atlanta to begin to retrofit the warehouses. It acquired the 15-acre property from data center operator QTS for nearly $2M last year and plan to break ground on the $80M redevelopment next year, Third & Urban Partner Chris Faussemagne said in an email.
Third & Urban, which is partnering with Maryland-based FCP on Westside Paper, is in talks with two lenders on construction financing, Faussemagne said. The firms are planning a mix of retail, restaurant and office uses at the old mills, which are adjacent to two of Atlanta's oldest adaptive reuse projects, Puritan Mill and King Plow Arts Center. Faussemagne said the property will eventually connect to the Westside BeltLine trail.
“The core West Midtown has seen huge growth over the past 15 years, fueled by adaptive projects such as Westside Provisions, Stockyards, and Brickworks,” he wrote in the email.
Multifamily is a focus now for the firm as the world emerges from the coronavirus pandemic, Lancaster said, especially as more people work from home. He didn't reveal a timetable for apartment construction at Westside Paper, but he did say Third & Urban's next few projects will focus on multifamily attached to their existing portfolio across the Southeast.
"If a pandemic has you concerned about your health or social distancing or having more space in your home or a place to work inside your home ... I think Westside Paper is a good cross-section of lower density,” he said.
Third & Urban isn't the only developer shifting from retrofitted commercial to adding ground-up multifamily as a compliment. Jamestown recently announced that it was expanding its vaunted Ponce City Market adaptive reuse project in the Old Fourth Ward neighborhood to include a new, four-story, timber-framed office building and a 400-unit "hotel-like" apartment tower.
Lancaster said Third & Urban is eyeing potential adaptive reuse projects in Tampa and Raleigh as well.
The firm has grown since it transformed a string of old warehouses in the Armour Yards district in 2015. From that one project, Third & Urban now has a portfolio of nearly 2M SF totaling more than $400M, including Common Ground in Old Fourth Ward and the Complex West Midtown. It has also expanded outside of Atlanta with current and planned adaptive reuse projects in Birmingham, Charlotte, Nashville and Orlando.
Aside from FCP, Third & Urban has partnered with other major investors, including JPMorgan, Angelo Gordon and Granite Properties, Lancaster said.
Colliers International estimated in 2017 that loft and adaptive reuse office comprised 2% of Atlanta's 223M SF office market. The supply's market share has doubled since then, now encompassing 4% of total metro Atlanta office, Colliers Atlanta Director of Research Scott Amoson said in an email.
Despite the pandemic and its impact on commercial real estate, Transcend CEO Patrick Braswell said firms like Third & Urban are making solid bets with adaptive reuse, as the trend will likely gain momentum into the next cycle. Construction costs are generally lower than new construction, and there seems to be a growing desire for workers to just be able to drive up to their office and walk in, avoiding having to take elevators, Braswell said.
“Adaptive reuse mostly is single-story warehouse stuff. I think, post-pandemic, people are going to be reluctant to go into high-rises 50 stories up,” he said. “I think we'll see a flight away from the 191 [Peachtree Towers] of the world toward more adaptive reuse.”
Loft office and adaptive reuse office growth are in direct correlation to the technology companies that have been flocking to Atlanta in recent months, Amoson said.
"It’s that kind of space that those companies and their employees desire," he said. "I would think this type of space in a post-pandemic world would be most desirable for even more tenants since the build-out provides openness."
Lancaster and his founding partner, Hank Farmer, were part of the early days of Atlanta's adaptive reuse movement as former executives with Jamestown, helping the developer transform a former Sears warehouse into Ponce City Market. Lancaster said they started Third & Urban after becoming convinced adaptive reuse trends that were entrenched in major cities like New York and Boston were bound for cities in the Southeast.
“We were just feeling like there was a void in the Southeast for that type of commercial development,” he said.
CORRECTION, DEC. 2, 4 P.M. ET: A previous version of the story's headline inferred that apartments were definitive at Westside Paper. The story also was updated to be clear that other possible commercial projects could occur at the project.
