Malls and offices are changing, and if Dunwoody is unwilling to urbanize the Perimeter with housing, then everyone can expect to see a dramatic increase in their property taxes, a decline in the quality of their dining options, and eventually a decline in their school system as well. Work from home has become an increasingly valuable option, and employers continue to struggle with whether to maintain their corporate offices. One of the main differences between office buildings that are successful and those that are not is whether employees can easily commute to their office. According to ERSI, in 2022, the median commute to an office for an employee in Dunwoody is 25.5 minutes. This is likely because few can afford to live in the immediate area.
I anticipate that the commute time will grow as Millennials continue to get priced out of suburban towns. In this day and age, not many people want to commute. They either want to work within the comfort of their home or live within a reasonable distance of their office. If they can’t, they’ll look elsewhere for employment. According to Zippia, on average, a Millennial will stay at their job for 2.75 years. Give them a longer commute without a reasonable housing option nearby, and it is likely to be less.
Office availability/vacancy is high in the market, with over 7 million square feet vacant just in the Perimeter Center. Most of the office buildings within the Central Perimeter, including Dunwoody, Brookhaven and Sandy Springs, are older, lower class buildings – the opposite of what employers want at this point. To attract reluctant workers back to the office, employers are seeking highly amenitized Class-A buildings with unique offerings that will entice workers to return to in-person work.
Malls and offices are changing – Dunwoody could, too
Dunwoody needs to allow more multifamily development if it wants to continue attracting businesses and residents. According to Realtor.com, Dunwoody’s 30360 zip code has seen a 67% housing inventory decline since April 2021. In fact, out of all Atlanta neighborhoods, Dunwoody’s housing supply has fallen the most in the past year. By refusing multifamily development, the suburb is preventing housing that is accessible to young Americans and the “missing middle.” We can see this in the negative population growth for young residents (between 25-40 years old) in Dunwoody. Millennials now make up over 50% of today’s workforce – yet many have no place to live in Dunwoody.
To think that Dunwoody can add for sale housing when home ownership is out of reach for close to 80% of Americans is a pipe dream, urban areas investing in their future must embrace rental housing options.
Multifamily drives the economy
Multifamily can be a key driver in the attractiveness of an office park environment. As an example, six years ago in Charlotte, Grubb Properties purchased two Class-C office buildings near the Park Road Shopping Center. The buildings were getting between $13.5 and $16 per square foot rents and one of them was less than 60% occupied. Grubb has since added 560 apartments in the parking lot, bringing valuable potential employees next to their offices and more importantly, bringing a boost to the retail in the area which has seen a dramatic uptick in new offerings. Today, both renovated office buildings are over 95% occupied with the latest lease at $31.5 per square foot in rent brought one of the buildings to 100% leased. The office buildings were purchased for under $18 million, and the last appraisal valued them at $84 million, creating not only valuable tax revenue for the community, but also a higher-quality, dense environment.
Meanwhile, Grubb’s office buildings at Perimeter Center East are profiting less rent today than they were six years ago, and occupancy is lower. Dunwoody heavily relies on the success of Perimeter Mall, but we all know malls, if left as they are today, are a dying breed. Business Insider predicts that in 10 years, there will be approximately 150 malls left in the U.S., compared to the 2,500 mall locations that existed in the 1980s. Today, there are 700 malls left, already a sharp decline. Statistically, Dunwoody cannot continue to rely on the draw of Perimeter Mall. They must proactively provide the foot traffic to keep it healthy.
A great example of a community that embraced housing is the South End neighborhood in Charlotte. It was the fastest-growing multifamily submarket in the country at one point, and today it boasts North Carolina’s most valuable office transaction. The $318 million Lowe’s tower set a Carolinas record for price-per-square foot at $889 in its most recent sales transaction.
Dunwoody is a quaint community that has enjoyed a golden goose for a long time. That golden goose has been a mall and office buildings – the two most fragile components of real estate. If it wants to protect that golden goose, it needs to embrace apartments for Millennials and its essential employees. These vibrant young people are the lifeblood of the future of any community. Many communities are offering subsidies for developers to attract product that houses the missing middle. Those suburban cores that refuse to embrace the future will soon learn that they’re stuck in the past and in order to attract talent, their employer companies will be forced to relocate to areas with quality housing for their work force.
