Sterling Bay Launching First Atlanta Office Project Completely On Spec
Chicago developer Sterling Bay, in a partnership with Charlotte developer Asana Partners, is breaking ground on a new office building in West Midtown without a single tenant in tow.
The developers plan to start construction next month on a 225K SF office building at the corner of West Marietta Street and Brady Avenue in West Midtown after landing a construction loan from Bank OZK.
The 14-story project is adjacent to Brickworks, a 194K SF adaptive reuse project that Asana purchased last year for $80M. The new project, called 1050 Brickworks, is Sterling Bay’s first ground-up project in Metro Atlanta.
“Atlanta is a priority for us because it's the economic engine of the Southeast,” Sterling Bay principal of acquisitions Ryan Walsh told Bisnow. "We think it's one of the major metros that will continue to thrive."
Erecting a new office building without a signed lease is a high-risk move not many developers and lenders are pursuing in the wake of rising interest rates and global economic fears.
Atlanta's office market has slowed following a strong period of demand, with 300K SF of net absorption in the third quarter, down from 1.8M SF the year before, according to CBRE numbers. Developers are already underway with another 2.8M SF of new offices in the metro area as office vacancies ticked up to 23.4%, nearly a percentage point higher than last year.
But Walsh said Asana and Sterling Bay are united on the thesis that offices in popular neighborhoods like Midtown will continue to thrive. Sterling Bay is planning on more Atlanta-area projects in the region, he added.
Asana Partners is betting on in-town offices, as well. Aside from Brickworks, the firm also owns The Krog District, Midtown Promenade, the 110K SF adaptive reuse project The Beacon on the BeltLine Southside Trail and the iconic Plaza on Ponce, home to the Plaza Theatre and Majestic Diner.
“Asana Partners looks at the world very similar to us. We're very interested in the food and beverage neighborhoods of Atlanta, whether that's the Westside or Eastside,” Walsh said. “To be able to do an office development in West Midtown with Asana Partners checked a lot of boxes for us.”
The plans for 1050 Brickworks call for 14K SF of street-level restaurants and retail under the Class-A office space. The developers expect to deliver the building in 2024.
Walsh said the development partners wanted to go spec on the building because tenant decision timelines have contracted — when companies make leasing decisions, they are doing so faster and prefer mixed-use projects.
For instance, Sterling Bay broke ground earlier this year on a 200K SF spec office building in Chicago's Fulton Market. Within 18 weeks, the building was 80% pre-leased, Walsh said.
“While the national headlines suggest that office will never come back, we are experiencing the polar opposite,” he said.
