By Greg Bluestein
The dilapidated Sears warehouse, one of the South’s most expansive buildings, is slowly being redeveloped into a modern-day mix of retail, apartments and office space at a project they call Ponce City Market that could help define a new type of Atlanta real estate market.
And the rejuvenation of the area isn’t without its troubles for, like Atlanta, the neighborhood is a place of frequent change.
Workers with Jamestown Properties, experts in reclaiming forgotten buildings, are doing the painstaking work of transforming the 2 million-square-foot building, a towering warehouse so expansive that today’s architects wouldn’t attempt to duplicate it.
Jamestown’s executives dream of attracting nontraditional tenants, from lawyers that shy away from typical skyscrapers to creative types who want to bring their pets to work. The company plans to invest more than $200 million in the venture, staking a claim on a chunk of the new offices for its new headquarters when it opens in 2014.
But risks abound. The building off Ponce de Leon sits about a mile from the nearest MARTA station and other amenities surrounding Atlanta’s dense office corridor. And there’s no timetable to link the building with rail after the failure of T-SPLOST, which would have funded streetcars along the nearby Beltline path.
And Ponce City Market is coming to life at a time when office vacancy rates remain stubbornly high and few developers are willing to even entertain the idea of new building. Here’s how big of a bet Ponce is: At the end of the third quarter, analysts say there was only 450,000 square feet of high-quality speculative office space under construction in metro Atlanta. All of it at Ponce City Market.
The reward for rehabbing the building, though, could pay great dividends. Tenants and visitors are wowed by the promise of unique features, such as the breathtaking atrium where trains once chugged into the building and massive concrete columns that support floors so sturdy they can accommodate drive-up parking in upper floors.
“We found that people crave history and authenticity and character,” said Jim Irwin, vice president of development for Jamestown. “We’re in a time when our culture is resisting mass production, and we want to preserve this culture and character.”
Ponce City Market’s story runs the course of modern-day Atlanta. In the early 1900s, the site was the home of a segregated amusement park and picnic grounds that featured the famous springs that, according to local legend, de Soto discovered while wandering through the wilderness.
After the park was shuttered, Sears picked the tract in 1926 for a massive distribution center, a major coup for an up-and-coming Atlanta vying with pesky neighbors for regional dominance. The company steadily expanded the warehouse over the decades into a sprawling 2.1 million-square-foot complex — roomier than the Mall of Georgia — where thousands of Atlantans worked.
In the 1970s and 1980s, the company began to phase out the building, finally shuttering it in 1987. Four years later, then-Atlanta Mayor Maynard Jackson announced what he called the “deal of the century” — an agreement to buy the building for $12 million and spend an additional $10 million rehabbing it.
But the city only needed a fraction of the space for what became City Hall East, and plans to lease floors to nonprofits and other firms fizzled out. Ballooning renovation costs and soaring utility bills forced the city to look for a new buyer, and the implosion of metro Atlanta’s housing market in the late 2000s scuttled plans by Gwinnett County developer Emory Morsberger to fashion several floors into condos.
After other deals fell through, Jamestown agreed to buy the building in 2011 for $27 million and invest more than $200 million in the finished product.
The company is perhaps best known for converting a former food manufacturing plant in Manhattan into Chelsea Market, an indoor food court, mall and office complex that’s home to media outlets and high-tech companies. It’s that expertise that gives executives faith they can pull off the same trick in Atlanta.
“We’ve got nothing but room,” Irwin said. “Nontraditional office space is something that the market demands. And it’s something that Atlanta doesn’t have.”
Aside from the office space, Jamestown hopes to create about 300,000 square feet of retail space — roughly the same as several floors of office space in a typical skyscraper — and build about 260 residential units. The atrium where workers once loaded trains would be converted into a Market Hall with dozens of vendors. Planning is also under way to link the building to the Beltline, which recently opened the eastern flank of its 22-mile loop.
Analysts agree it won’t be easy to fill the space even if the office market continues a steady recovery. With so much unique space, the project can’t rely on traditional office tenants to fill each floor.
“They’ve got to get two or three big tenants — and it needs to be the right tenant, someone that has cachet, that validates what the project is,” said Steve Martin, a managing principal with the commercial real estate firm SDM Partners. He mentioned popular name brands such as Apple as potential targets that would fit the bill.
“It’s risky,” he said. “But if they can pull it off, there’s big rewards.”