WATER COOLER TALK: Takeaways from the Bisnow State of the Market Conference

SEPTEMBER 25, 2019 | THE PALOMAR GROUP

Major Projects in Atlanta have to get creative to combat rising development cost – Takeaways from the Bisnow State of the Market Conference

Development costs continue to rise for Class A offices in Atlanta:

· 1999 – 1 Alliance Building – $186/SF
· 2008 – 2 Alliance Building – $320/SF
· 2014 – 3 Alliance Building – $404/SF
· 2019 – Class A Office – $540/SF
· Projected 2030 – $920/SF

This is an average growth of 5%/year in construction costs. The US average growth in construction cost is 3.5%/year. To combat the labor costs, developers are hiring great designers that use cost-effective materials that allow builders to do more with less.

Trade wars will have a short term impact but should not have a long-term impact. Labor is locally competitive, and supplies are globally competitive. Mixed-Use projects year in and year out are the most expensive due to their complexity. Developers are focused on adding green spaces.

Parking is a huge issue and has a huge impact on costs. Today, it costs $30,000 per parking spot to construct a parking deck. Cars are less important to millennials, and driverless cars will help solve some parking issues.

Multifamily – There is plenty of rent growth, but developers are concerned about labor costs. Prefabricated bathrooms offsite are a way to reduce costs.