The owner of a high-profile property in one of Atlanta's weakest areas for office space is testing the market with a sales listing as demand for those type of buildings poses challenges across the country.
Dilweg, a Chapel Hill, North Carolina-based real estate investor, has listed 101 Marietta St. for sale for an undetermined asking price, according to CBRE, the brokerage handling the sale with Newmark. The 36-story building, known for its illuminated triangle on the exterior of its top floors, is 62% leased, according to CoStar data.
The outcome may provide insight into the level of demand for older office towers, not only in downtown Atlanta but also other parts of the city. The downtown Atlanta office market has struggled with elevated vacancy rates along with some other areas such as West Midtown. The recent opening of several new buildings in West Midtown has added even more supply to the office market.
"The Atlanta market still has to work through new builds in the face of lower office attendance post-pandemic," Madelyn Bearn, associate director of market analytics at CoStar, wrote in a research note.
Dilweg decided to list the 101 Marietta property now because the firm has owned it for about 10 years and “it has run the course of its investment life” at Dilweg, Will Yowell, vice chairman at CBRE who is listing the building for the owner, told CoStar News. In addition, two major retail and residential developments are underway near 101 Marietta that Yowell said could help with the office tower's leasing by increasing foot traffic nearby. And the national office market appears to be getting better, he said.
“We’re starting to see a rebound in leasing activity and general liquidity in the office market is improving,” Yowell said. “Dilweg felt this was a good time to sell.”
Dilweg completed a renovation of the main lobby and common spaces during its ownership, Yowell said. The 51-year-old building’s largest tenants are the Atlanta Hawks with 55,863 square feet and an office for attorneys who represent indigents in federal courts in Georgia with 32,940 square feet, according to CoStar data. The building was once home to WeWork's largest location in Atlanta where the coworking company occupied floors 28 through 31 but vacated the tower in 2021 as part of its global streamlining.
The two major nearby developments are CIM Group’s $5 billion Centennial Yards mixed-use project and CP Group’s renovation of the former CNN Center to a retail property called The Center. Both are a short walk from 101 Marietta. In 2023, the Signia by Hilton hotel opened, the first new hotel tower in downtown Atlanta in at least a decade.
Nevertheless, prominent office properties in downtown Atlanta, such as Peachtree Center, have struggled with high vacancy rates. The downtown market’s overall vacancy rate is 17.1%, compared to 16.6% for metropolitan Atlanta and 13.9% for the U.S., according to CoStar data.
At least one high-profile tenant recently decided to leave downtown Atlanta for offices elsewhere in the city. HNTB, an engineering and architecture firm, plans to vacate about 31,000 square feet at 191 Peachtree St. and move to 14th & Spring in Midtown this year.
Last week, an affiliate of Lone Star Funds forfeited ownership of downtown’s 55 Allen Plaza to its lender, an affiliate of Sound Point Capital Management. The building is the last top-tier office property to open in downtown Atlanta in almost 20 years.
Office buildings in other parts of Atlanta are also getting hit by the weak office market. New office buildings in West Midtown, including Echo Street West and Westside Paper, have struggled to attract tenants.
For the record
Yowell at CBRE and Jay O’Meara, Justin Parsonnet and Ryan Reethof at Newmark represent Dilweg on the sales listing. Brian Linnihan and JP Cordeiro at CBRE are providing advice on debt and structured finance.