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ATLANTA — The Streets of Buckhead, a $1.5 billion luxury retail project touted as this city’s version of Rodeo Drive, might instead become a symbol of the recession’s impact.
Work has stopped on the project and denim label AG Adriano Goldschmied, and sportswear and swim brand Vilebrequin have backed out after signing letters of intent to lease. Brioni has put plans on hold, and Bottega Veneta is “evaluating” its commitment, spokesmen said.
The uncertain future of the development in one of Atlanta’s most affluent neighborhoods is an indication of the economic challenges that face developers and retailers in a region that has been among the fastest-growing in the U.S.
Streets of Buckhead developer Ben Carter is “watching the economy with everyone else” and hopes to open the first phase of the project — 375,000 square feet of retail and 350 residential rental units — in early 2011, a spokeswoman said. No date for the resumption of construction has been set.
Carter, who declined requests for an interview, said in March that 20 luxury retailers, including Oscar de la Renta, Van Cleef & Arpels, Brioni and Etro signed leases, and Bottega Veneta and Loro Piana signed letters of intent.
But circumstances have changed.
Robert Rosenfeld, vice president of retail for Goldschmied, said, “We will not be proceeding.” Describing the Streets of Buckhead as “an interesting project,” Thierry Prissert, Vilebrequin chief executive officer, North America, said, “The timing is not right to open.”
The seven-block, nine-acre development already had been scaled back, and construction has been postponed three times since the groundbreaking in August 2007. The project has sought to lure high-end European fashion brands. It initially called for 600,000 square feet of retail space, 300,000 square feet of offices, four hotels and two 21-story condominium towers, with initial plans to open the first retail phase in fall 2009. But the office space has been eliminated and the hotels shelved until at least 2012.
Carter’s spokeswoman said the project was “wrapping up several leases,” but declined to be more specific.
In anticipation of an on-time opening, Hermès, a lease signee, moved from its location in Buckhead’s Lenox Square mall this year to a Carter-owned temporary space between an Irish pub and a public library. Hermès did not respond to a request for comment.
The Streets of Buckhead site is now a collection of idle construction cranes, a partly built parking garage and a few cleared lots.
Former Atlanta mayor Sam Massell, president of the Buckhead Coalition, a nonprofit group of ceo’s of Buckhead businesses, such as Georgia Power and Novare Group developers, said: “This project would be tough in a perfect economy. It’s not surprising that it made sense to slow down and take another look. What [Carter] undertook is, at best, a very difficult challenge.”
Massell estimated Buckhead has 2 million square feet of new, vacant commercial space out of 8 million total square feet, as well as 1,000 new condominiums for sale.
“For the first time in decades, Buckhead does have some vacant retail space,” he said. “It’s an unusual phenomenon for our community.”
So unusual that officials are taking nontraditional steps to drum up business. Massell said the coalition in September paid $500,000 for two full-page color ads in The Wall Street Journal that touted Buckhead property as “historically affordable.”
Buckhead is the most prominent, but by no means the only, Atlanta community struggling to cope with the fallout of the downturn.
In the 28-county Atlanta region, which ranked fifth in growth among major metro areas and was the eighth largest based on the most recent Census data, commercial property values have fallen about 20 percent and home values are down almost 12 percent in the 12-month period that ended in June, a Zillow Real Estate market report said.
Metro Atlanta was the nation’s 10th largest economy in 2008, generating a gross metropolitan product of $269.8 billion, said the U.S. Bureau of Economic Analysis. Home foreclosures in August were up almost 7 percent compared with July and 26 percent over August 2008, according to Realty Trac.
The unemployment rate in Atlanta rose to 10.7 percent in August versus 5.8 percent in the same period last year. Rajeev Dhawan, director of Georgia State University’s Economic Forecasting Center, predicted joblessness would increase to 11 percent in 2010 and characterized any rebound as “tepid.”
Some economists predict a genuine economic rebound in Atlanta won’t begin until 2011, once the job market has gained traction and the construction industry stabilizes.
“The Atlanta metro area will lack construction opportunities of sufficient number and size as the state’s banking industry takes its time to recover,” Dhawan said, noting the recent failures of 19 Georgia banks accounted for 25 percent of the national total.
Even population growth has tapered. With 5.6 million people, metro Atlanta has added more than 100,000 people a year (400,000 from 2007 to 2008) for a decade, but added about 50,000 from 2008 to 2009.
In this environment, Atlanta developers are delaying projects, scaling back or shifting their focus, especially as the luxury sector suffers and mid-tier centers such as Atlantic Station, with Ikea, Dillard’s and Target as anchors, fare better.
“In the last six months, we’ve had more [tenant] inquiries from restaurants than any other category,” said Shirley Gouffon, vice president of Selig Enterprises, a developer of 12th & Midtown, a mixed-use component of the $2 billion Midtown Mile project.
Spanning 14 blocks of Peachtree Street, Atlanta’s main thoroughfare, the Midtown Mile broke ground in 2006, and aimed to create 1 million square feet of street-level retail by 2010. Now 12th & Midtown has opened 50,000 square feet of retail, consisting entirely of restaurants. CB2, a sister store of Crate & Barrel, has signed a letter of intent to open a 14,000-square-foot flagship next summer. The project also has 440 condominiums priced from $300,000 to $1 million.
“I used to have meetings monthly [with potential luxury retailers], but with these types of retailers, they’re just dried up,” Gouffon said.