Q2 2011 | OFFICE
ATLANTA
MARKET REPORT
Atlanta Office Absorption Positive at Mid-Year
MARKET INDICATORS Q2 2011
Projected
Q3 2011
VACANCY
Thanks to a productive spring, Atlanta’s office market is in positive territory heading into the second half of 2011. Office absorption totaled almost 400,000 square feet in second quarter; the strongest period of occupancy gain since the third quarter of 2007. Combined with the lackluster beginning to the year, Atlanta’s office market has seen a total of 355,000 square feet absorbed year-to-date. As opposed to first quarter, second quarter’s activity was the result of less space being added to the market through tenant contractions and consolidations. The majority of move-ins over the past three months were from tenants ranging between 15,000 to 40,000 square feet, which are considered to be “bread and butter” transactions. An increase in the number of these transactions is an encouraging sign. Companies contributing to positive absorption in the quarter include Agilysys, Kaiser Permanente and Turner Broadcasting, each of which expanded their office space usage. Likewise, North American Electric Reliability Corp. (NERC) and ThyssenKrupp IT opened new Atlanta offices in the second quarter. With an increase in occupied space, the overall vacancy rate for office space in Atlanta dropped slightly from the prior period. Compared to this time last year, however, the rate remains relatively unchanged. In addition, although Atlanta is seeing more office space absorbed, rental rate growth has yet to take hold. Office rental rates decreased for the eleventh time in twelve quarters.
NET ABSORPTION CONSTRUCTION
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RENTAL RATE
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CAP RATES
Current conditions closely match Atlanta’s office market from a year ago when mid-year absorption totaled 304,000 square feet. This is important to point out because it shows where the city is in the recovery cycle: modestly steady. Though positive, on the whole, office market activity in Atlanta remains somewhat subdued and far from robust. The outlook for the remainder of the year is not expected to vary from prior quarters. The revolving door of contractions, consolidations and expansions will continue to inundate the market providing no clear picture of when the city will break out of the mired situation plaguing many office markets nationwide. On that point, continued on page 2
ATLANTA OFFICE
NEW SUPPLY, ABSORPTION AND VACANCY RATES
UPDATE Atlanta Rental Rates Overall Market & Class A (per sq. ft.)
25%
6,000,000 $25.00
$25.00
5,000,000
$24.00
$24.00
3,000,000
Market AVG
2011
2010
2009
2008
5%
(2,000,000) (3,000,000)
0% Absorption
www.colliers.com/atlanta
2007
2011 2011
2010 2010
2009 2009
2008 2008
Class A
(1,000,000)
2006
$17.00
$17.00
10%
0
$18.00
2005
$18.00
1,000,000 2004
$19.00
$19.00
15%
2,000,000
2003
$20.00
$20.00
Square Feet
$21.00
2002
$22.00
$22.00
$21.00
20%
4,000,000
$23.00
$23.00
Deliveries
Vacancy %
The Atlanta office market saw occupancy increase in Second Quarter 2011. This has pushed the year-to-date absorption total to positive 355,416 SF. Vacancy is down slightly from first quarter, but relatively unchanged from a year ago. There have been no deliveries to date. Cox Communication’s buildto-suits are the only significant buildings currently under construction.