Q2 2012 | OFFICE
ATLANTA
MARKET REPORT
At Mid-Year, Atlanta’s Office Vacancy Continues to Drop
Updated May 2012
MARKET INDICATORS Q2 2012
Projected
Q3 2012
VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE
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The overall vacancy rate for Atlanta’s office market posted its fifth consecutive quarterly decline in second quarter, ending the period at its lowest point since 2009. As of mid-year 2012, office vacancy stands at 17.4% in Atlanta. Occupancy gains in the first half of the year have more than doubled the amount from all of 2011. The Atlanta office market absorbed 764,270 square feet of space in the second quarter bringing the year-to-date total to just over 1.3 million square feet. Like first quarter, a portion of second quarter’s move-in activity was from prior transactions signed over the past couple of years taking occupancy. Included among these are Greenberg Traurig which moved to its new 94,000 square foot office at Terminus 200 in Buckhead and SunTrust Robinson Humphrey which expanded its office space by 135,000 square feet at Atlanta Financial Center also in Buckhead. A significant amount of second quarter’s absorption, however, came from Cox Enterprises occupying the first phase of its new headquarters building which delivered this quarter. This amounted to 300,000 square feet of absorption. A second phase building of the same size is expected to deliver by year’s end. The communications and media company is consolidating from existing office locations across Atlanta to the newly built office campus. In regards to office leasing, levels remained strong in second quarter with Central Perimeter seeing the majority of the activity. During the past three months alone, almost 1 million square feet of leases were signed in the submarket. State Farm’s recent lease for 434,513 square feet at 64 & 66 Perimeter Center was the most significant to occur. This transaction will likely be the largest of the year in the Atlanta office market. With absorption having already surpassed 2011’s amount, Atlanta’s office market is poised to finish the year with its highest increase in occupancy since 2007. Leasing activity occurring in the first half of 2012 will contribute to solid office absorption gains in the latter half of the year. This amount though is not likely to match mid-year levels. Looking further ahead, as upbeat and positive as the Atlanta office
CAP RATES
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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 $23.00 $23.00
3,000,000
1,000,000 2012
2011
2010
2009
5% 0%
Absorption
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2008
(3,000,000)
2007
Market AVG
2006
(2,000,000)
2005
(1,000,000)
2012 2012
Class A
2011 2011
2010 2010
2009 2009
$17.00 $17.00
10%
0
$18.00 $18.00
2004
$19.00 $19.00
15%
2,000,000
2003
$20.00 $20.00
Square Feet
$22.00 $22.00 $21.00 $21.00
20%
4,000,000
Deliveries
Vacancy %
Occupancy in Atlanta’s office market increased for the fifth consecutive quarter. Absorption totaled 764,270 SF in the second quarter, bringing the year-to-date total to over 1.3 million square feet. Overall vacancy decreased yet again finishing mid-year 2012 at 17.4%. Cox Enterprises’ 300,000 square foot Phase I headquarters was the largest delivery in the second quarter.