Atlanta Mayor Andre Dickens is pressing Microsoft for clarity about the future of a parcel of city land that was supposed to become a major corporate campus for the tech giant.
Microsoft announced in 2021 that it would build a new complex on a 90-acre site in Atlanta’s Grove Park neighborhood, creating as many as 15,000 jobs in the city. But the project came to a standstill last year before officially breaking ground, when the company said it was reevaluating its global real estate portfolio post-pandemic.
Dickens said he’s reaching out to Microsoft in the next week to get an update on the project and whether it’s still viable. If not, Dickens said he’s ready to try to take back the land for the city or partner with a developer.
“We really want them to develop their property or offer it back to us so we can develop it,” Dickens said in an interview at Bloomberg’s Atlanta office. “Even if you don’t know what you want to do, just let us know what you know you won’t be able to do.”
Microsoft declined to comment. The company has previously said the Grove Park property isn’t for sale and it will reengage in planning efforts when the time is right.
The company has already opened a new office in the Atlantic Yards district in 2022, housing 2,000 employees. That office, along with the Grove Park campus about 5 miles away and three new data centers, were part of Microsoft’s vision to make the Atlanta region one of its largest hubs outside its headquarters in Redmond, which provides about 50,000 jobs. The company employs 220,000 people globally.
The uncertainty over Microsoft’s expansion reflects a broader trend of technology and other companies scaling back their office space and workforces in the wake of the pandemic, which has accelerated the move to remote and hybrid work. The trend is having implications for major U.S. cities, including Atlanta, which is facing one of the highest office vacancy rates in the country, at about 24% by the end of last year, according to brokerage Cushman & Wakefield.
More than 20% of offices in the Atlanta area financed with commercial mortgage-backed securities are at least 90 days delinquent, the most of any metro area, according to data compiled by Bloomberg. Property owners use CMBS to finance a range of properties, including offices, retail and industrial assets.
Dickens said he’s not worried about demand for amenity-rich and high-quality Class A buildings, which are still attracting tenants and investment especially compared to the older and less desirable Class B and C buildings. He pointed to cranes in the skyline as signs of new development, such as a $5 billion Centennial Yards project by CIM Group in partnership with backers led by Atlanta Hawks owner Tony Ressler in a gritty former rail yard known as The Gulch, which will include hotels, restaurants and offices.
Still, Dickens said he’s monitoring how the decline in market values for office buildings will affect the city’s budget, which relies heavily on property taxes from commercial real estate owners. About 19% of the city’s tax revenue comes from the commercial property market, according to the Tax Policy Center, a nonpartisan think tank. That is more than many other major U.S. cities such as Miami and New York, which get about 10% of their income from such taxes.
While the office market has been more challenging, Atlanta’s residential market has remained robust, said Dickens. Strong job growth and a pandemic real estate boom, fueled in part by people moving from pricier cities, have sent the area’s housing costs soaring. The average rent in the Atlanta area jumped 34% to $1,897 since the pandemic began in 2020, outpacing the 29% national increase, according to data from Zillow Group.
One of the biggest challenges to making housing affordable for the city’s residents is the presence of institutional investors or corporate buyers, who purchase large numbers of houses for investment purposes, said Dickens. Atlanta is the largest market for such investors, who own about 72,000 homes in the area, according to data company SFR Analytics.
“There are individuals who buy up lots of property, sight unseen, using big capital” and squeeze would-be homebuyers out of the market, Dickens said. “Those investors are investing with other people’s money too. They’re using pension funds” and other types of investment vehicles.
Bloomberg’s Michael Sasso, John Gittelsohn and Amanda Albright contributed to this report.
Read More: Atlanta wants Microsoft to bring city 15,000 jobs or return land