Not just for Sunday anymore

Jarred Schenke

April 1, 2008

The "For Sale" sign has been planted in front of 680 West Peachtree Street for a year now. And finally, its seller, the Catholic Archdiocese of Atlanta, is close to reaching a deal with a buyer.

Now comes the next challenge: Finding an office building in Atlanta to buy for the Archdiocese's 100,000 square feet of office space, a jump from the 80,000 square feet it uses at its current building, says Patricia Chivers, a spokesperson for the Catholic Archdiocese. "We are looking to sell this building and be able to buy something that, of course, has the increased square footage, but is the same price."
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The Archdiocese is emblematic of a growing user in the commercial real estate market: religious users. And while the Catholic Archdiocese needs the space to house its office functions – including Hispanic services and charity organizations, which currently are leasing space at One Georgia Center, but will be consolidated into the new building – many other churches have begun to use traditional office or industrial space for actual religious services, a phenomenon that only has sprung up in the metro area this past decade.

Certainly by the total supply of commercial real estate in Atlanta, religious organizations only lease a fraction – more than 1.35 million square feet, according to industry tracking firm CoStar Group Inc. But when considering the average size of a religious user is 7,500 square feet, that number is staggering, industry experts say.

And the uses are growing as more churches start up in the metro area in space that developers originally slated for corporate America.

Perhaps there's a Biblical analogy to what's happening today. Alan Hansen views it as the seeding of new churches. "What you have is a new generation of church planting," says Hansen, president of Acts 29 Ministry, a Christian consulting and training ministry for pastors and clergy. While churches, technically not-for-profit organizations, have some tax benefits to owning real estate, many new churches are starting with no financial backing or credit to be able to buy real estate. So commercial space offers a viable alternative, especially to accommodate rapid growth, Hansen says.

"The best thing you can do is find a space that can be expanded. And if you outgrow it, you can just simply terminate the lease you're in and move to a new place that can accommodate your new size," he says.

Certainly, there's been a growth in the number of people attending churches, although at the sacrifice of attendance at mainline Protestant churches nationwide. Total national Christian religious identification increased by more than 8 million between 1990 and 2001, according to the U.S. Census Bureau.

While Protestant denominations lost ground, Christian nondenominational congregations jumped in the highest amount, short of those claiming no religious identification. A recent Pew Forum study found similar results, and also went on to determine there is great fluidity in people's identifications to denominations, with a lot of movement between churches.

This kind of growth certainly has affected the Catholic Archdiocese in Atlanta. Membership jumped from 292,300 members in 1998 to 750,000 members in 2008, a 156 percent jump in its congregation. The Catholic faith now tallies 10 percent of all metropolitan Atlanta residents, Chivers says, aided in large part by immigration from Latin America and Catholic transplants from the northern United States.

In today's real estate market, purchasing land and developing a chapel is financially out of reach for many congregations, says Tim Head, director of office properties with Bryant Commercial Real Estate, an Atlanta-based commercial real estate services firm. "The land that is available for these kinds of churches is no longer affordable."

Hansen agrees, "If you're talking a sanctuary that seats 400 people, then you have the parish hall, kitchen, parking ... It's a huge investment."

Cost of owning and building was certainly a factor in leading One Heart Church to what ostensibly is a warehouse. But the project, called Avalon Ridge in Norcross, had other virtues that ultimately led to the pastors' decision to lease the commercial space, says Keith Hagan, the associate pastor with the church.

"When you start with zero, certainly from an economic viewpoint, you don't have the financial ability to mortgage a property," he says.

But the property also gave them something else: visibility. "We're in a pretty good traffic area, and the traffic on Old Peachtree and Spalding [roads] has picked up tremendously in the two years here," Hagan says.

"When we put up our signs, we got a tremendous amount of feedback from people who were just sitting in traffic waiting for the light to change who said, ‘A church? There?' "

The visible location helped propel One Heart to grow from a nonexistent congregation to one now tallying 300 members. Hagan also says Avalon Ridge allows One Heart Church the room for a variety of other functions outside of Sunday service, including Bible study classes, support groups and weekday services.

"Churches see the value of having the space maybe in a nontraditional style, but is still in a high visibility location," Hagan says. "Churches must have the ability to flex and grow fairly rapidly. This kind of facility affords that kind of option."

Dale Karrh, managing principal with Newmark Knight Frank in Atlanta, also has seen increased demand among religious organizations for office space in the metro area. "They've continued to grow over the years and now they're having to expand in different directions. The bottom line is that the population of the church is growing."

For some landlords in Atlanta, snagging a growing church just may be the saving grace for office or industrial space that was just sitting empty, Head says. "[Churches are] enabling these landlords to lease space that otherwise probably would go unleased."

But with that comes some sacrifice for landlords, having to offer the space at reduced rates in some cases. "Probably a third of them are sitting [in the space] for just operating expenses," he adds.

"From what I've seen, landlords aren't excited about churches because they're a different animal," says Park Williams, a real estate broker at Richard Bowers & Co.

Aside from reduced rates, church tenants often require a lot of parking spaces to accommodate parishioners. That may be detrimental to some properties, particularly industrial warehouses, which rely on light traffic for those tenants who are using trucking fleets to distribute products.

Says Williams, "They come with very little money, especially if they're in start-up mode. So it doesn't really sync up well with the landlord's main goal."