Wednesday, May 5, 2010

Selling Underground a great idea in theory

Stephanie Ramage reports that the idea of selling Underground Atlanta was floated at the city's budget hearings. Councilwoman Yolanda Adrean suggested it, which prompted an interesting reaction from Councilman Ivory Young:
Councilman Ivory Lee Young Jr. expressed concern about what would be at the site if Underground wasn’t there. He said he was puzzled as to why so many people—Georgia State students, state employees, tourists—go through near by Five Points MARTA station each day, but fail to leave spend any money at Undergound, which has lost money for years.
Really?  How can this confuse you?  Presumably Councilman Young has been to Five Points recently, but every time I've been one of those 'many people' going through Five Points, it has been for the sole purpose of, well, going through Five Points.  When you are commuting you don't just decide to stop and see Underground - you are trying to get to work on time, etc.  It also isn't like Underground catches your eye from Five Points, either, assuming you even leave the station.  The number of commuters at Five Points doesn't really translate into traffic counts like on a main arterial road.  As one of the many GSU students who works a block from Five Points many days, I rarely cross the street even to Five Points Plaza, much less Underground.  Why would I?  There is nothing there to do.  It fails as a destination in its own right.



I agree with Councilwoman Adrean that selling Underground makes a lot of sense.  The city should not be in the real estate development/property management business.  Municipal government is a services business, and their role is to provide basic services that allow everyone else in the city to live their lives.  There is no reason that Councilman Young should be trying to figure out why Underground is dead.  It isn't fair to expect him to.  He's not a real estate professional.  The city should not be in this business.

This gets me to why I say selling Underground is a great idea in theory.  In practice, who would buy Underground?  At what price?  I wouldn't expect anyone to buy Underground on a speculative basis, which means you are selling a piece of property that has historically lost money.  It'd be great if someone who really knew what they were doing wanted Underground - an experienced retail developer like Jacoby or Simon might know enough about these sorts of spaces to turn Underground around.  Thing is, the underlying fundamentals for the Five Points area are not good, so there is only so much you can do.

I am still of the opinion that the only thing which can revive Underground and Five Points is a new dormitory by GSU.  There is no demand for anything else, really.  I guess you could try locating more government offices in the area - y'know, since that has worked so well thus far.  Other than GSU students, who would choose to live at Five Points?  Sure, you have a few folks at Kessler Lofts, William Oliver, and the Metropolitan condos.  I'd wager that existing buildings pretty much take up all existing demand for Five Points living that is not GSU-related.  I don't think anyone in their right mind would suggest Underground as a location for a hotel or new office building.  We've all seen that the existing retail space isn't in huge demand.

So I'm left with a dormitory.  Perhaps the best-case scenario is for GSU to buy Underground from the city in a JV with an experienced retail operator, build a ton of dorms, and hope that will provide enough demand to lease-up the space in Underground with quality tenants.  Maybe there are other institutional users who could be attracted to the space, or perhaps a private student housing developer would take a gamble.

4 comments:

  1. The reason why no one goes to Underground is the same reason that nobody goes to Five Points unless they absolutely have to. People don't want to go through Calcutta to get to an empty place with lame retail establishments. Georgia State's expansion will be on hold for the next decade due to its budget.

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  2. I am continually shocked at the number of visitors who are duped into visiting Underground and how that experience affects their perception of Atlanta. It's not exactly positive.

    The only reason I go there is for AtlanTIX.

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  3. Whenever I've been there, I do see a lot of people. Putting aside that it loses money (NOT a small thing to put aside), I wonder when people say it's a total failure or no one goes there. I mean, I do see people in the shops below and I have friends from outside the area who go there when they're in town.

    Ben, you've made so many great points here and you've obviously taken a closer look at the issue than I have. But in terms of attracting a crowd, I mean there are some people who do go there, no? Is it that it's not the kind of people the city hoped for or it's not the kind of people who spend enough?

    Obviously, I agree with your point that city officials are not real estate developers and the city's main focus is providing basic services for citizens and hence the city is the wrong entity to own/manage Underground.

    http://atlantaunsheltered.com/

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  4. Your observation (which I agree with) that the underlying fundamentals for the Five Points area are not good is what makes Underground so problematic. In the abstract Underground's prospects sound fantastic. Located at the confluence of four major transit lines and integrated with the Five Points station. A few blocks from city, county, state and federal government offices, the WCC, a major university, freeways, pro sports venues and just about every other amenity Downtown can possibly pull together. Lots of historic charm. Special zoning and decades of financial and public relations support from one of America's more boosteristic cities.

    Yet even the the Rouse company, famed for its success with "festival marketplaces" in other cities, couldn't make a go of it.

    So why can't Underground succeed?

    It's clearly not a project for city government and I agree that it should be sold to private interests. If, for whatever reasons, it's simply not viable, then so be it. It's worth remembering that the old Underground of the 1960s and 70s was quite popular without support from the city or real estate developers. It grew up and thrived organically, because people wanted to come there.

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