Centennial Yards Office Put 'On Ice' As Demand Collapses

CIM Group is changing tack at Centennial Yards, its $5B development in Downtown Atlanta, delaying plans to build a new office tower and pivoting away from office at an existing building on the site.

Centennial Yards Co., the development arm of CIM Group that is transforming the Gulch into a sprawling mixed-use campus, had planned to raze the former Atlanta Journal-Constitution printing press building attached to 2 City Plaza and erect a 520K SF office tower dubbed 1 City Plaza.

Those plans are now on indefinite hold, Centennial Yards Co. President Brian McGowan said at Bisnow’s urban core event on Aug. 30 at the Crowne Plaza Atlanta Midtown.

"We put it on ice," McGowan said. "It was almost fully designed. We're ready to break ground. And then every major tech company that you can name had been through our door was interested in it, and then they all hit pause at the same time."

Instead, the developer is pivoting its focus to retail, hotel and residential as it builds out the first phases of Centennial Yards in Downtown Atlanta, he said. It had filed for permits to raze the building in February

McGowan also said Centennial Yards Co. is holding off on redeveloping 99 Ted Turner Drive — the second building that is part of the former Norfolk Southern offices connected by a skybridge — into 90K SF of creative office. 

“It’s empty space now. Could be apartments or boutique hotel,” McGowan said in an email follow-up about 99 Ted Turner Drive.

He didn't elaborate on those plans. 

The first part of the complex, 125 Spring St., was turned into The Lofts at Centennial Yards South, an apartment complex that is more than 90% leased. McGowan said he expects a third of the planned Centennial Yards project to be open and operating by 2026.

The project spans 50 acres and is planned to incorporate 8M SF of new development, ultimately transforming the sea of asphalt and old train facilities known as the Gulch into a miniature city next to State Farm Arena and Mercedes-Benz Stadium.

Centennial Yards' office pivot follows the departure of former Centennial Yards Co. Vice President Scott DeMyer, who was head of commercial leasing. DeMyer left CIM Group in March, according to his LinkedIn profile. In July, Foundry Commercial announced that DeMyer joined its Atlanta office as senior vice president.

The developer is still underway on a 300-room hotel and another 300-unit apartment project across the street from Mercedes-Benz Stadium.

Centennial Yards Co. is the latest developer in Downtown Atlanta to either turn away from office or actively seek to convert space once used for corporate tenants into something else. 

During the event, Lalani Ventures CEO Shaneel Lalani, who owns the iconic Underground Atlanta, announced plans to convert 20 of the 30 floors at 34 Peachtree St., a tower just two blocks from the former AJC printing press site, into 200 apartment units.

Invest Atlanta, the economic development arm for the city, plans to redevelop the 41-story 2 Peachtree St. tower, which it acquired earlier this year for $39M from the state of Georgia, into a mixed-use development that will include an affordable housing component. 

Ares Management co-founder Tony Ressler, owner of the Atlanta Hawks and an investor in CIM Group — which is run by his brother, Richard Ressler — told Bloomberg in April that the developer was likely to de-emphasize office at Centennial Yards as it moves “full steam ahead” on the project.

“Higher or lower interest rates may change your rate of return but will not determine the success or failure of a project. For us, the project is funded and we’re full steam ahead,” Tony Ressler told Bloomberg. “The obstacle is more about what do you want to build, because you’re going into a different type of economy. There will still be office. Downtown is a really attractive office location.”

McGowan echoed that commitment to the project during the event.

“When I got back to Atlanta two years ago, people would seriously ask me, ‘Are you guys really going to do this?’” McGowan said. “And my answer was always, ‘If you know anything about Richard or Tony Ressler, you know these people do what they say they're going to do.’”

Metro Atlanta’s office market took a nosedive in the second quarter, with more than 1.6M SF in office space hitting the market, according to Lee & Associates. The vacancy rate eclipsed 19% for the region.

At the same time, Downtown Atlanta’s 33M SF office submarket was 15.5% vacant, following positive absorption of 76K SF in the second quarter, according to Lee & Associates.

Still, Downtown is feeling the pressure of some key tenants migrating to Midtown, which has become the focus over the past decade among tech firms and corporate tenants. Most recently, consulting giant Deloitte signed a lease for 92K SF at Promenade Tower in Midtown, with plans to ditch its 262K SF office at 191 Peachtree Tower, Bisnow was first to report.

“KPMG is going to be kind of the next big Downtown tenant that is coming up on their lease expiration. We know that they’re also looking at Midtown as a possible location,” JLL Senior Managing Director Brooke Dewey said on the panel. “That said, though … we’re still seeing gains in Downtown as well. There’s still activity Downtown. There’s still desire to be in Downtown.”

While CIM Group will eventually develop offices as part of Centennial Yards, McGowan said focusing on residential, retail and hotels may be the better strategy as the developer strives to create a new ecosystem in the area. Bringing in more people — apartment dwellers, hotel guests and those there to shop and dine — will eventually lure corporate tenants to the submarket, McGowan said.

“It actually is strangely working for us to kind of just focus on residential and retail and hotel,” he said. “We believe office will be valuable there when there are bars and restaurants. Office will work. It’s just right now, as everyone knows, there’s not a lot of leases being signed.”