2Q 2012 | Atlanta Office Market Report by Colliers International

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

—

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

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 $23.00 $23.00

3,000,000

1,000,000 2012

2011

2010

2009

5% 0%

Absorption

www.colliers.com/atlanta

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%

$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.

MARKET REPORT | Q2 2012 | OFFICE | ATLANTA

VACANCY & AVAILABILITY •

Over the course of a year, Atlanta’s office vacancy has dropped 0.7%, amounting to over 1.5 million square feet of vacant space filled.

•

As of mid-year 2012, office absorption totals 1,342,776 square feet. This amount is more than double 2011’s total absorption.

•

Class A office remains the most desirable space in Atlanta. The positive activity for this product type has brought its vacancy rate down almost 2.5% from a peak high back in 2010.

•

Buckhead and Central Perimeter combined for practically all of second quarter’s occupancy gains.

•

Buckhead vacancy decreased for a sixth straight quarter. The submarket’s vacancy rate is down 7.5% from its peak in 2010. Only 11 office properties here are able to accommodate tenants seeking 30,000 square feet or more.

The majority of this year’s office leasing has taken place in Midtown, North Fulton and Central Perimeter; with the latter accounting for 27% of the activity.

•

Atlanta is on track to absorb over 2 million square feet of office space in the year.

Vacant Space-Space that is not currently occupied by a tenant, regardless of any lease obligation on the space.

Sublease Space-Space that has been

Q2 2012 | Vacant Space By Type

Q2 2012 | Net Absorption by Submarket 500,000

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.

CLASS C 3,433,471 SF VCY RATE = 16%

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

200,000 100,000

NORTH FULTON

Build-to-Suit-A term describing property that

300,000

NORTHWEST

CLASS A 19,032,654 SF VCY RATE = 17.4%

CLASS B 16,129,713 SF VCY RATE = 17.7%

DOWNTOWN

400,000

NORTHLAKE

Leasing Activity-The volume of square

WEST ATLANTA

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.

SOUTH ATLANTA

Deliveries-Buildings

NORTHEAST

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

ABSORPTION & LEASING ACTIVITY

MIDTOWN

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

BUCKHEAD

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

market is, lingering concerns related to the global and national economies could have an adverse effect on leasing demand here; most notably on office expansions like the metro area has experienced over the past couple of years. Negative outlooks and pessimistic views by industry insiders have become somewhat of a nuisance in the market, feeding the concerns of businesses trying to decide their future office needs. Additionally, small business growth is slowing. When times get tough, this type of growth is usually the first to go. During Atlanta’s current recovery cycle, small businesses have helped augment office absorption. For now, demand for office space in Atlanta remains solid given the number of active requirements in the market. A wait and see approach is needed to determine whether or not the positive absorption trend of 2011 and 2012 will continue into next year.

Square Feet

DEFINITIONS

0 (100,000)

(200,000)

Class A

Class B

Class C (300,000)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

10 Peachtree Place

Midtown

5/11/2012

$61,400,000

258,917

$237.14

Prudential Real Estate

Decatur Plaza

Northlake

5/30/2012

$23,100,000

112,807

$204.77

Senior Housing Prop. Tr.

100 Ashford Center

Central Perimeter

7/9/2012

$15,500,000

154,113

$100.58

Parkway Properties

Peachtree Ridge

Northeast Atlanta

7/9/2012

$14,400,000

161,411

$89.21

Parkway Properties

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

64/66 Perimeter Center

Central Perimeter

State Farm

Rubenstein Partners

434,513

Class A Lease

900 Ashwood

Central Perimeter

Oldcastle Materials

LNR Partners

91,595

Class A Lease

3905 Brookside Pky.

North Fulton

Red Prairie

TIAA-CREF

80,314

Class B Direct Lease

North Terraces

Central Perimeter

Elekta

Rubenstein Partners

77,100

Class A Lease

P. 2

| COLLIERS INTERNATIONAL

MARKET REPORT | Q2 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 78 Total 193

14,770,027 9,394,495 3,642,282 27,806,804

2,592,753 1,147,749 726,757 4,467,259

17.6% 12.2% 20.0% 16.1%

303,445 1,310 304,755

2.1% 0.0% 1.1%

MIDTOWN A B C Total

38 100 38 176

15,265,244 6,101,801 884,951 22,251,996

2,663,072 856,312 83,186 3,602,570

17.4% 14.0% 9.4% 16.2%

165,837 17,661 11,424 194,922

BUCKHEAD A 46 B 51 C 42 Total 139

15,136,275 4,375,333 1,050,897 20,562,505

2,400,710 755,999 69,810 3,226,519

15.9% 17.3% 6.6% 15.7%

URBAN TOTAL A 112 B 238 C 158 Total 508

45,171,546 19,871,629 5,578,130 70,621,305

7,656,535 2,760,060 879,753 11,296,348

SUBURBAN CENTRAL PERIMETER A 68 19,298,600 B 146 7,848,196 C 97 1,790,931 Total 311 28,937,727 NORTH FULTON A 101 B 320 C 59 Total 480

CLASS

BLDGS

EXISTING PROPERTIES

ABSORPTION

RENT

VCY PRIOR %

2,896,198 1,149,059 726,757 4,772,014

19.6% 12.2% 20.0% 17.2%

19.0% 12.0% 19.9% 16.8%

(84,628) (20,926) (260) (105,814)

(206,088) (38,477) 24,331 (220,234)

1.1% 0.3% 1.3% 0.9%

2,828,909 873,973 94,610 3,797,492

18.5% 14.3% 10.7% 17.1%

19.7% 15.5% 9.1% 18.2%

185,666 70,910 (13,996) 242,580

343,648 145,120 (24,417) 464,351

168,163 18,253 186,416

1.1% 0.4% 0.9%

2,568,873 774,252 69,810 3,412,935

17.0% 17.7% 6.6% 16.6%

19.5% 17.5% 6.7% 18.4%

375,793 (7,285) 574 369,082

457,478 (3,267) 10,355 464,566

16.9% 13.9% 15.8% 16.0%

637,445 37,224 11,424 686,093

1.4% 0.2% 0.2% 1.0%

8,293,980 2,797,284 891,177 11,982,441

18.4% 14.1% 16.0% 17.0%

19.4% 14.3% 15.7% 17.7%

476,831 42,699 (13,682) 505,848

595,038 103,376 10,269 708,683

3,086,659 2,289,670 358,235 5,734,564

16.0% 29.2% 20.0% 19.8%

237,684 60,519 298,203

1.2% 0.8% 1.0%

3,324,343 2,350,189 358,235 6,032,767

17.2% 29.9% 20.0% 20.8%

18.4% 29.4% 19.0% 21.5%

476,363 (41,702) (17,132) 417,529

676,507 76,205 5,464 758,176

15,577,393 11,147,928 1,038,372 27,763,693

2,330,053 1,725,894 84,052 4,139,999

15.0% 15.5% 8.1% 14.9%

244,208 44,808 289,016

1.6% 0.4% 1.0%

2,574,261 1,770,702 84,052 4,429,015

16.5% 15.9% 8.1% 16.0%

15.8% 15.6% 9.1% 15.5%

(118,223) (28,943) 10,045 (137,121)

(126,629) 93,268 15,880 (17,481)

NORTHEAST ATLANTA A 59 7,473,343 B 414 13,405,778 C 123 2,510,459 Total 596 23,389,580

1,271,291 2,976,748 258,504 4,506,543

17.0% 22.2% 10.3% 19.3%

21,063 90,211 3,595 114,869

0.3% 0.7% 0.1% 0.5%

1,292,354 3,066,959 262,099 4,621,412

17.3% 22.9% 10.4% 19.8%

18.7% 23.3% 10.1% 20.4%

102,752 52,862 (8,139) 147,475

101,924 (29,187) (16,113) 56,624

NORTHLAKE A 20 B 329 C 165 Total 514

2,831,105 12,227,969 3,530,219 18,589,293

429,495 1,825,183 314,521 2,569,199

15.2% 14.9% 8.9% 13.8%

3,463 42,394 2,696 48,553

0.1% 0.3% 0.1% 0.3%

432,958 1,867,577 317,217 2,617,752

15.3% 15.3% 9.0% 14.1%

16.6% 14.7% 9.1% 13.9%

37,028 (59,382) 2,425 (19,929)

(75,833) (142,606) 44,292 (174,147)

13,822 13,822

$20.29 $16.89 $12.83 $16.72

NORTHWEST ATLANTA A 77 B 419 C 147 Total 643

17,574,160 15,792,823 2,626,087 35,993,070

2,659,447 2,997,844 345,022 6,002,313

15.1% 19.0% 13.1% 16.7%

88,382 44,718 2,025 135,125

0.5% 0.3% 0.1% 0.4%

2,747,829 3,042,562 347,047 6,137,438

15.6% 19.3% 13.2% 17.1%

14.8% 19.2% 12.5% 16.6%

(149,086) (12,704) (17,711) (179,501)

(147,592) 25,893 14,647 (107,052)

16,650 16,650

$21.62 $15.01 $14.20 $18.07

SOUTH ATLANTA A 17 B 242 C 131 Total 390

1,299,997 9,307,757 2,660,773 13,268,527

347,798 1,066,786 414,647 1,829,231

26.8% 11.5% 15.6% 13.8%

19,131 52,345 71,476

1.5% 0.6% 0.5%

366,929 1,119,131 414,647 1,900,707

28.2% 12.0% 15.6% 14.3%

27.5% 12.0% 15.3% 14.2%

(9,432) 1,963 (8,530) (15,999)

(5,268) 45,293 14,843 54,868

$20.72 $15.86 $13.45 $16.36

WEST ATLANTA A B 60 C 36 Total 96

1,518,107 1,752,079 3,270,186

115,309 758,997 874,306

7.6% 43.3% 26.7%

115,309 758,997 874,306

7.6% 43.3% 26.7%

7.9% 43.6% 27.3%

40,843 5,125 45,968

62,783 322 63,105

40,000 40,000

$14.35 $11.43 $12.73

10,124,743 12,997,434 2,533,978 25,656,155

15.8% 18.2% 15.9% 17.0%

613,931 334,995 8,316 957,242

1.0% 18.7% 16.0% 0.6%

10,738,674 13,332,429 2,542,294 26,613,397

16.8% 18.7% 16.0% 17.6%

16.9% 18.6% 15.8% 17.6%

339,402 (47,063) (33,917) 258,422

423,109 131,649 79,335 634,093

300,000 53,822 353,822

300,000 69,822 369,822

644,476 56,650 701,126

$20.68 $15.40 $13.05 $16.72

17,781,278 15,757,494 3,413,731 36,952,503

16.3% 17.3% 15.9% 16.7%

1,251,376 372,219 19,740 1,643,335

1.1% 0.4% 0.1% 0.7%

19,032,654 16,129,713 3,433,471 38,595,838

17.4% 17.7% 16.0% 17.4%

17.9% 17.6% 15.8% 17.6%

816,233 (4,364) (47,599) 764,270

1,018,147 235,025 89,604 1,342,776

300,000 53,822 353,822

300,000 69,822 369,822

644,476 506,650 1,151,126

$22.28 $15.36 $13.60 $18.96

1,643,335 1,785,688 1,776,945 1,788,902 1,976,984

0.7% 0.8% 0.8% 0.8% 0.9%

38,595,838 39,006,286 39,568,792 39,862,760 40,117,070

17.4% 17.6% 17.9% 18.0% 18.1%

17.6% 17.9% 18.0% 18.1% 18.2%

764,270 578,506 293,968 254,310 405,184

1,342,776 578,506 564,726 270,758 16,448

353,822 16,000 311,000

369,822 16,000 330,015 330,015 330,015

1,151,126 1,504,948 1,440,948 646,472 632,650

$18.96 $18.97 $19.02 $19.07 $19.22

SUBURBAN TOTAL A 342 B 1,930 C 758 Total 3,030

64,054,598 71,248,558 15,908,920 151,212,076

ATLANTA MARKET GRAND TOTAL A 454 109,226,144 B 2,168 91,120,187 C 916 21,487,050 Total 3,538 221,833,381

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

U/C

VCY CURR %

TOTAL VCY SF

DELIVERIES

300,000 300,000

300,000 16,000 316,000

UNDER AVG CONSTR RENT SF RATE

450,000 450,000

$19.88 $14.46 $15.05 $18.28

$26.95 $17.75 $14.81 $24.83

$26.59 $18.95 $17.36 $24.80

450,000 450,000

$24.47 $17.05 $15.74 $22.64

300,000 300,000

$21.82 $18.04 $13.37 $20.07

344,476 344,476

$20.17 $14.12 $12.72 $17.66

$19.46 $13.55 $13.34 $15.43

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

3,538 3,535 3,534 3,534 3,534

221,833,381 221,479,559 221,463,559 221,463,559 221,463,559

36,952,503 37,220,598 37,791,847 38,073,858 38,140,086

16.7% 16.8% 17.1% 17.2% 17.2%

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 | Q2 2012 | OFFICE | ATLANTA

CONSTRUCTION •

•

Cox Enterprises’ first phase of its new headquarters campus delivered in second quarter. This amounted to 300,000 square feet. Phase II is set to deliver later this year.

•

No new office buildings went under construction in the second quarter. The near term outlook for new construction remains restrained.

522 offices in 62 countries on 6 continents

Average concessions have eased in most office submarkets. The most aggressive landlords can be found in Central Perimeter.

United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118

INVESTMENT & SALES ACTIVITY

RENTAL RATES & CONCESSIONS •

Four of Atlanta’s office submarkets reported an increase in their average rental rates. These include Downtown, Midtown, North Fulton and Northwest Atlanta.

•

The average rental rate for Atlanta office space held steady this quarter. The current trend suggests market rents are close to bottoming.

Though second quarter investment activity was slow, a number of major office properties went to market. Some of these are already under contract and expected to close in third quarter.

•

$1.8 billion in annual revenue

• Over 2.5 billion square feet under

management • Over 12,000 professionals

CONSTRUCTION ACTIVITY (100,000 SF+) 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

Cox: 6205 P’tree Dunwoody Rd. - 2

Central Perimeter

300,000

Fourth Quarter 2012

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 . 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

ho 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.

UNITED STATES: 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

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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