Last Summer, when Barry Sternlicht handed back the keys to Tower Place 100, the 29-story class A office building off Piedmont Road in the heart of Buckhead, the building was almost half empty. Just over 60 percent of the more than 600,000 square feet of commercial space in the building was rented.
That was sharply down from 87 percent in 2018 when Sternlicht’s Starwood Capital Group took out a mortgage of more than $200 million to buy the Atlanta landmark. So, Starwood, which is a major corporate landlord with more than $115 billion in assets under management, was unable or unwilling to refinance the loan or pay it off. The building went back to the bank.
Last week, Sternlicht estimated that lenders have absorbed $1.2 trillion in losses from loans made for office buildings, although he admitted to Bloomberg News that “nobody knows exactly where it is,” and that it could put many smaller banks under considerable pressure.
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In Atlanta, like most major office markets around the country, commercial portfolio managers are crunching the numbers and deciding whether to hold on to troubled office buildings or let them go.
Office occupancy rates dropped sharply during the pandemic as workers stayed home to work from behind their computer on the dining room table or in the bedroom. But even after the public health emergency has faded, demand for office space has been sluggish.
The 29-story Tower Place 100 office building in Buckhead was given back to the lender last summer.
For economic observers like Jeffrey Humphreys, director of the Simon Selig Center for Economic Growth at the University of Georgia, Atlanta’s depressed office market has been aggravated by the surge in new construction that has occurred in the metropolitan area in recent years.
“I think we’re very oversupplied in respect to office space, particularly after the work from home phenomenon, which I think is…
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