1Q 2012 | Atlanta Office | Market Report by Colliers International

Q1 2012 | OFFICE

ATLANTA

MARKET REPORT

Atlanta Office Absorption Continues its Positive Trend

MARKET INDICATORS Q1 2012

Projected

Q2 2012

VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE

—

CAP RATES

—

Carrying over the positive occupancy gains experienced in 2011, Atlanta’s office market began 2012 with absorption totaling just over 625,000 square feet; an amount equal to almost all of last year’s total. First quarter’s occupancy gains can be attributed to factors such as prior leasing activity which has now moved to the occupancy phase, expansions of existing tenants in the Atlanta market and continued small business growth. Transactions signed during the past couple of years and now taking occupancy were some of the largest move-ins in first quarter. Examples include Kids II which moved into 102,818 square feet in Buckhead, Ventyx which relocated to 55,257 square feet in Central Perimeter and Internap which relocated office functions to 59,000 square feet also in Central Perimeter. Of note, all of these moves were expansions of the companies’ previous office footprints. Other tenant expansions in the market contributing to first quarter’s positive absorption were Delta Dental which moved into an additional 21,352 square feet at its office in North Fulton, Lockheed moving into another 20,711 square feet in its Northlake office building and Robert Half taking another 19,253 square feet at its Buckhead office. In addition to the positive effects of these expansions, small businesses continued to provide incremental growth to occupancy in the office market. Hiring from small businesses averaged 0.6% growth over the past quarter. This is down from the 3.2% growth in hiring in fourth quarter 2011, but still above the national average. Atlanta’s office market recovery continues to show signs of strengthening. The first quarter of the year exemplified this best with yet another solid period of space absorption. Heading into second quarter, much of the same is expected. Like first quarter, there are a number of scheduled move-ins from prior leasing activity set to take place. Examples include Greenberg Traurig which is relocating from 47,683 square feet at The Forum in Northwest Atlanta to 93,466 square feet at Terminus 200 in Buckhead, and PricewaterhouseCoopers continued on page 2

ATLANTA OFFICE

NEW SUPPLY, ABSORPTION AND VACANCY RATES

UPDATE Atlanta Rental Rates Overall Market & Class A (per sq. ft.)

6,000,000 $25.00 $25.00

25%

5,000,000

$24.00 $24.00

4,000,000

$23.00 $23.00

20%

3,000,000

Class A

Market AVG

10% 2012

2011

2010

2009

(3,000,000) 0%

(4,000,000) Absorption

www.colliers.com/atlanta

2008

(2,000,000)

2007

$17.00 $17.00

2006

(1,000,000)

2005

$18.00 $18.00

2012

2011 2011

2010 2010

2009 2009

$19.00 $19.00

15%

1,000,000 2004

$20.00 $20.00

2,000,000

2003

$21.00 $21.00

Square Feet

$22.00 $22.00

Deliveries

Vacancy %

Occupancy in Atlanta’s office market increased for the fourth consecutive quarter. Absorption totaled 627,818 SF in the first quarter. This brought the overall vacancy rate down to 17.6%. Only one building of 16,000 SF delivered during the period. Though Class A rental rates are close to bottoming, the overall average for the market has yet to show any upwards movement.

MARKET REPORT | Q1 2012 | OFFICE | ATLANTA

VACANCY & AVAILABILITY

•

All three property types saw a drop in vacancy in the first quarter.

•

Central Perimeter and Midtown saw a 1% drop in vacancy. These submarkets are expected to see vacancy rates drop even further in the year.

•

Move-out activity in the past three months was less than previous quarters. This limited the amount of available space added to the market.

Deliveries-Buildings

Q1 2012 | Vacant Space By Type

•

The biggest factor contributing to positive absorption this quarter was expansions.

•

Submarkets experiencing the largest occupancy gains were Midtown, Central Perimeter and North Fulton. By year’s end, these submarkets will see the most office space absorbed in the Atlanta market.

•

Office leasing remained steady in the first quarter but was a little off from this time last year. Q1 2012 | Net Absorption by Submarket 350,000

footage that is committed to and signed for under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity for buildings under construction or planned.

250,000

CLASS A 19,285,660 SF VCY RATE = 17.8%

Build-to-Suit-A term describing property that

CLASS B 15,888,022 SF VCY RATE = 17.6%

CLASS C 3,571,073 SF VCY RATE = 16.8%

was developed specifically for a certain tenant to occupy. Can be either leased or owned by the tenant.

200,000 150,000 100,000 50,000 0

NORTHEAST

300,000

DOWNTOWN

Leasing Activity-The volume of square

First quarter office absorption in Atlanta was just shy of 2011’s total.

NORTHLAKE

that complete construction during a specified period of time. A certificate of occupancy must have been issued for the property for it to be considered delivered.

•

WEST ATLANTA

leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

Atlanta’s office vacancy declined for the fourth consecutive quarter. It now stands at 17.6% which is back to 2009 levels.

NORTHWEST

Sublease Space-Space that has been

•

BUCKHEAD

occupied by a tenant, regardless of any lease obligation on the space.

ABSORPTION & LEASING ACTIVITY

SOUTH ATLANTA

Vacant Space-Space that is not currently

NORTH FULTON

Vacancy Rate-A percentage of the total amount of physically vacant space divided by the total amount of existing inventory.

MIDTOWN

occupied space over a given period of time, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

CENTRAL PERIMETER

Absorption (Net)-The net change in

which is moving up the street from its current office space of 145,000 square feet at 10 10th Street to 140,000 square feet at 1075 Peachtree in Midtown. On the whole, Atlanta’s office market will likely see less absorption next quarter thanks to a number of consolidations set to occur; yet still remain in positive territory. There are encouraging indicators pointing to office activity maintaining a positive course. A recent data revision by the Bureau of Labor Statistics shows the metro Atlanta area adding 34,300 jobs rather than losing jobs in 2011. Comparing year-over-year in January 2012, metro Atlanta’s employment growth showed its strongest expansion since 2007. The industry sector leading the growth was professional and business services; a segment which includes technology companies. This industry has had the most influence on the office market’s occupancy gains over the past year, and is expected to be the demand driver through the remainder of the year.

Square Feet

DEFINITIONS

(50,000)

Class A

Class B

Class C

(100,000) (150,000)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

180 Peachtree St. (port.)

Downtown

1/3/2012

$94,750,000

338,000

$280.33

Carter Validus REIT

3399 Peachtree Rd.

Buckhead

3/6/2012

$59,300,000

348,152

$170.33

Parmenter Realty

201 17th Street

Midtown

12/21/2011

$48,825,000

349,402

$139.74

CBRE Global Investors

50 Hurt Plaza

Downtown

2/15/2012

$17,500,000

436,340

$40.11

Boxer Property

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

760 Doug Davis Dr.

South Atlanta

Delta Airlines

Digital Realty Trust

167,000

Class B Leaseback

Concourse Corp. Ctr. II

Central Perimeter

Dell Secureworks

TIAA-CREF

115,000

Class A Lease

Concourse Corp. Ctr. I

Central Perimeter

Elavon

TIAA-CREF

112,000

Class A Renewal & Expansion

RiverEdge Summit

Northwest Atlanta

Graphic Packaging

iStar Financial

109,556

Class A Lease

P. 2

| COLLIERS INTERNATIONAL

MARKET REPORT | Q1 2012 | OFFICE | ATLANTA

UPDATE

Market Comparisons

VACANCY

TOTAL SF

DIRECT VCY SF

DIRECT VCY %

SUB VCY SF

SUB VCY %

URBAN DOWNTOWN A 28 B 87 C 79 Total 194

14,770,027 9,326,982 3,623,817 27,720,826

2,516,877 1,164,775 739,172 4,420,824

17.0% 12.5% 20.4% 15.9%

264,422 1,310 265,732

1.8% 0.0% 1.0%

MIDTOWN A B C Total

38 101 38 177

15,223,520 6,117,051 884,951 22,225,522

2,837,755 960,431 92,048 3,890,234

18.6% 15.7% 10.4% 17.5%

160,903 16,768 11,424 189,095

BUCKHEAD A 49 B 52 C 43 Total 144

15,045,272 4,445,020 1,060,897 20,551,189

2,764,923 748,464 70,384 3,583,771

18.4% 16.8% 6.6% 17.4%

URBAN TOTAL A 115 B 240 C 160 Total 515

45,038,819 19,889,053 5,569,665 70,497,537

8,119,555 2,873,670 901,604 11,894,829

SUBURBAN CENTRAL PERIMETER A 67 18,997,289 B 144 7,708,444 C 99 1,832,745 Total 310 28,538,478 NORTH FULTON A 100 B 322 C 60 Total 482

CLASS

BLDGS

EXISTING PROPERTIES

ABSORPTION

RENT

VCY PRIOR %

2,781,299 1,166,085 739,172 4,686,556

18.8% 12.5% 20.4% 16.9%

18.2% 12.3% 21.1% 16.6%

(94,625) (17,551) 24,591 (87,585)

1.1% 0.3% 1.3% 0.9%

2,998,658 977,199 103,472 4,079,329

19.7% 16.0% 11.7% 18.4%

20.9% 17.2% 10.5% 19.4%

178,400 73,548 (10,421) 241,527

168,340 18,503 186,843

1.1% 0.4% 0.9%

2,933,263 766,967 70,384 3,770,614

19.5% 17.3% 6.6% 18.3%

20.1% 17.3% 7.6% 18.9%

90,546 4,018 9,781 104,345

18.0% 14.4% 16.2% 16.9%

593,665 36,581 11,424 641,670

1.3% 0.2% 0.2% 0.9%

8,713,220 2,910,251 913,028 12,536,499

19.3% 14.6% 16.4% 17.8%

19.7% 14.9% 16.8% 18.1%

174,321 60,015 23,951 258,287

450,000 450,000

$23.78 $17.38 $15.58 $22.05

3,335,877 2,095,938 347,507 5,779,322

17.6% 27.2% 19.0% 20.3%

147,030 84,993 232,023

0.8% 1.1% 0.8%

3,482,907 2,180,931 347,507 6,011,345

18.3% 28.3% 19.0% 21.1%

19.4% 29.2% 20.2% 22.1%

201,825 77,845 22,596 302,266

16,000 16,000

600,000 600,000

$21.83 $17.81 $13.30 $20.07

15,473,490 11,258,888 1,062,317 27,794,695

2,020,453 1,686,188 97,597 3,804,238

13.1% 15.0% 9.2% 13.7%

246,198 33,242 279,440

1.6% 0.3% 1.0%

2,266,651 1,719,430 97,597 4,083,678

14.6% 15.3% 9.2% 14.7%

15.0% 16.4% 9.7% 15.3%

49,599 122,211 5,835 177,645

NORTHEAST ATLANTA A 59 7,476,192 B 416 13,648,993 C 118 2,283,907 Total 593 23,409,092

1,302,089 2,945,648 238,949 4,486,686

17.4% 21.6% 10.5% 19.2%

88,868 63,767 3,595 156,230

1.2% 0.5% 0.2% 0.7%

1,390,957 3,009,415 242,544 4,642,916

18.6% 22.0% 10.6% 19.8%

18.6% 21.5% 10.4% 19.5%

(3,963) (77,008) (6,074) (87,045)

344,476 344,476

$19.56 $13.87 $12.89 $15.72

NORTHLAKE A 20 B 330 C 166 Total 516

2,830,738 12,244,933 3,542,245 18,617,916

464,321 1,664,391 472,403 2,601,115

16.4% 13.6% 13.3% 14.0%

5,665 59,522 65,187

0.2% 0.5% 0.4%

469,986 1,723,913 472,403 2,666,302

16.6% 14.1% 13.3% 14.3%

12.6% 14.0% 14.5% 13.9%

(112,861) (12,764) 41,867 (83,758)

290,000 290,000

$20.34 $16.95 $13.49 $16.86

NORTHWEST ATLANTA A 77 B 422 C 147 Total 646

17,497,120 15,883,599 2,624,282 36,005,001

2,480,868 2,982,427 330,530 5,793,825

14.2% 18.8% 12.6% 16.1%

123,574 113,437 2,025 239,036

0.7% 0.7% 0.1% 0.7%

2,604,442 3,095,864 332,555 6,032,861

14.9% 19.5% 12.7% 16.8%

14.4% 19.6% 14.1% 16.7%

(76,123) 10,552 38,290 (27,281)

16,650 16,650

$21.26 $15.00 $14.25 $17.78

SOUTH ATLANTA A 17 B 234 C 129 Total 380

1,302,124 8,430,914 2,614,476 12,347,514

343,221 1,079,721 401,317 1,824,259

26.4% 12.8% 15.3% 14.8%

14,276 52,345 66,621

1.1% 0.6% 0.5%

357,497 1,132,066 401,317 1,890,880

27.5% 13.4% 15.3% 15.3%

27.8% 13.9% 16.2% 15.9%

4,164 43,330 23,073 70,567

$21.29 $15.85 $12.72 $16.52

WEST ATLANTA A B 58 C 35 Total 93

1,439,601 1,738,518 3,178,119

116,152 764,122 880,274

8.1% 44.0% 27.7%

116,152 764,122 880,274

8.1% 44.0% 27.7%

9.6% 43.7% 28.2%

21,940 (4,803) 17,137

$15.80 $11.30 $13.22

9,946,829 12,570,465 2,652,425 25,169,719

15.6% 17.8% 16.9% 16.8%

625,611 407,306 5,620 1,038,537

1.0% 18.4% 16.9% 0.7%

10,572,440 12,977,771 2,658,045 26,208,256

16.6% 18.4% 16.9% 17.5%

16.7% 18.6% 17.7% 17.7%

62,641 186,106 120,784 369,531

16,000 16,000

1,234,476 16,650 1,251,126

$20.73 $15.66 $13.01 $16.84

18,066,384 15,444,135 3,554,029 37,064,548

16.6% 17.1% 16.7% 16.8%

1,219,276 443,887 17,044 1,680,207

1.1% 0.5% 0.1% 0.8%

19,285,660 15,888,022 3,571,073 38,744,755

17.8% 17.6% 16.8% 17.6%

18.0% 17.8% 17.5% 17.9%

236,962 246,121 144,735 627,818

16,000 16,000

1,234,476 466,650 1,701,126

$21.97 $15.67 $13.55 $18.85

1,680,207 1,665,006 1,730,663 1,918,745 2,051,814

0.8% 0.8% 0.8% 0.9% 0.9%

38,744,755 39,356,573 39,720,865 40,002,733 40,089,849

17.6% 17.9% 18.0% 18.2% 18.2%

17.9% 18.0% 18.2% 18.2% 18.1%

627,818 364,292 281,868 398,116 (321,010)

627,818 723,266 358,974 77,106 (321,010)

16,000 311,000 19,015

16,000 330,015 330,015 330,015 19,015

1,701,126 1,717,126 632,650 632,650 927,650

$18.85 $18.90 $18.90 $19.05 $19.26

SUBURBAN TOTAL A 340 B 1,926 C 754 Total 3,020

63,576,953 70,615,372 15,698,490 149,890,815

ATLANTA MARKET GRAND TOTAL A 455 108,615,772 B 2,166 90,504,425 C 914 21,268,155 Total 3,535 220,388,352

NET NET NEW NEW ABSORP ABSORP SUPPLY SUPPLY CURR SF YTD SF CURR SF YTD SF

U/C

VCY CURR %

TOTAL VCY SF

DELIVERIES

UNDER AVG CONSTR RENT SF RATE

450,000 450,000

$19.67 $15.52 $14.74 $18.34

$27.00 $17.82 $13.64 $24.52

$24.66 $18.81 $18.37 $23.29

$20.08 $14.33 $13.15 $17.68

QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q1-12 Q4-11 Q3-11 Q2-11 Q1-11

3,535 3,534 3,534 3,534 3,533

220,388,352 220,372,352 220,372,352 220,372,352 220,061,352

37,064,548 37,691,567 37,990,202 38,083,988 38,038,035

16.8% 17.1% 17.2% 17.3% 17.3%

NOTE: STATISTICAL SET CONSISTS OF OFFICE PROPERTIES 10,000 SF AND UP, INCLUDING OWNER-OCCUPIED PROPERTIES; AND EXCLUDING MEDICAL OFFICE AND PROPERTIES WHERE THE GOVERNMENT IS 100% OWNER AND OCCUPIER. WHILE COSTAR ATTEMPTS TO PROVIDE THE MOST ACCURATE DATA AT THE END OF EVERY QUARTER, REVISIONS ARE MADE THROUGHOUT THE YEAR ACCOUNTING FOR DISCREPANCIES IN PAST REPORTING.

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 3

MARKET REPORT | Q1 2012 | OFFICE | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

Only one small office building of 16,000 SF delivered in first quarter.

•

Atlanta’s average rental rate has yet to hit bottom, posting yet another decline in first quarter.

•

The majority of office space under construction continues to be build-to-suits. Cox Enterprises’ first phase office building of 300,000 SF is expected to deliver in second quarter.

•

No new office projects are on the horizon, though construction could possibly begin on an office building in the North Fulton submarket by the end of the year.

There are some pockets in the market where rental rates appear to have bottomed. These areas include Northeast Atlanta and Central Perimeter. North Fulton is the only submarket where rents have started trending upwards.

522 offices in 62 countries on 6 continents United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118

INVESTMENT & SALES ACTIVITY •

Investment sales volume in first quarter is on par with this time last year at $200 million.

•

$1.8 billion in annual revenue

• Over 2.5 billion square feet under

CONSTRUCTION ACTIVITY (100,000 SF+)

management • Over 12,000 professionals

PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

675 Ponce De Leon Ave.

Midtown

450,000

First Quarter 2014

Primerica - 3100 Breckinridge Blvd

Northeast Atlanta

344,476

Third Quarter 2012

UNITED STATES:

Cox: 6205 P’tree Dunwoody Rd. - 1

Central Perimeter

300,000

Second Quarter 2012

Cox: 6205 P’tree Dunwoody Rd. - 2

Central Perimeter

300,000

Fourth Quarter 2012

CDC - 4770 Buford Hwy.

Northlake

290,000

Second Quarter 2013

Atlanta Caldwell Zimmerman Executive VP | Colliers Manager Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 888 9000 FAX +1 404 870 2845

Canton GAINESVILLE Cumming

CHEROKEE CO. FULTON CO. FUL L FORSYTH CO. FOR R

Allatona Lake

Emerson

Lake Lanier

Woodstock CHEROKEE CO.

Acworth

Sugar Hill

FO RS FU

Mountain Park

CO N . CO .

NORTHEAST ATLANTA

e hooch e tac

Cha t

PAULDING CO. COBB CO.

Alpharetta Roswell

NORTHWEST ATLANTA

Bras

H YT O LT

BARTOW CO.

OFFICE SUBMARKETS

Buford

HA GW INN LL CO . ETT CO .

NORTH FULTON Rive r

BARTOW CO. CHEROKEE CO.

Cartersville

Duluth

316 CO BB FU LT CO O . N CO .

MARIETTA

CENTRAL PERIMETER

Lawrenceville

DORAVILLE Norcross

CHAMBLEE SMYRNA

NORTHLAKEG

W IN DE NE KA TT LB C CO O. .

BUCKHEAD Austell COBB CO. DOUGLAS CO.

Clarkston

WEST ATLANTA

ch e

Douglasville

CO .

MIDTOWN DECATUR DE ECA ATUR Avondale Estates Estate

DOWNTOWN

W AL TO N

CO .

att

h ac

ATLANTA

Snellville

Stone Mountain G W IN NE TT

R iv

PAULDING CO.

DEKALB CO. C FULTON CO. C

Powder Springs

DEKALB HENRY

Hartsfield-Jackson International Airport

FULTON CO. COWETA CO.

Palmetto

FOREST PARK

SOUTH ATLANTA Riverdale Riverda

Fairburn

CO. CO.

Conyers Covington RO C NE KDA WT LE ON CO CO . .

CLAYTON LAYT L A ON CO.

Union City

675

DE KALB RO CO CK . DA LE CO .

Lithonia EAST POINT COLLEGE PARK HAPEVILLE

Stockbridge

. ON CO FULT CO. TTE FAYE

The Atlanta office market consists of ten submarkets. They include the urban markets of Downtown, Midtown and Buckhead, and the suburban markets of Central Perimeter, North Fulton, Northwest Atlanta, Northeast Atlanta, Northlake, South Atlanta and West Atlanta. The major interstates in the region include: I-75, I-85, I-285, I-575, I-985, I-675 and I-20. Georgia 400 and US 316 also play important roles to Atlanta’s transportation system.

RESEARCHER: Atlanta Scott Amoson Vice President | Director of Research Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 877 9286 FAX +1 404 870 2845

Jonesboro

McDonough BU TT S

CO .

HENRY CO. CLAYTON CO.

Fayetteville

Newnan Peachtree City

This market report is a research document of Colliers International. Information herein has been deemed reliable and no representation is made as to the accuracy thereof. Colliers International-Atlanta, Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 520 offices throughout 62 countries worldwide.

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