Q3 2010 | OFFICE
ATLANTA
MARKET REPORT
Modest Q3 Office Absorption for Atlanta
MARKET INDICATORS Q3 2010
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VACANCY NET ABSORPTION
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CONSTRUCTION RENTAL RATE
Atlanta’s office absorption was positive for the third consecutive quarter proving the market has officially turned the corner from the record occupancy loss posted in 2009. Though modest, third quarter occupancy rose by 32,621 square feet. Adding this amount to the two previous quarters shows year-to-date office absorption now totaling 223,402 square feet in Atlanta; an amount not seen since before the “great” recession hit. Class A office buildings absorbed the highest amount of space in third quarter with 478,000 square feet filled. This is the largest quarterly occupancy increase of Class A office space in three years. The key move-ins contributing to this positive activity were GE Energy moving its new smart grid division into 107,207 square feet in Northwest Atlanta, AutoTrader relocating its headquarters into 102,070 square feet in Central Perimeter, Novelis relocating its headquarters into 100,178 square feet in Buckhead and Wells Fargo entering the Atlanta market with 65,671 square feet of new occupancy also in Buckhead. In all cases, the outcome of these move-ins resulted in a net positive amount of space absorbed; either through expansion or new occupancy. When looking at how the positive office activity in third quarter affected vacancy, Atlanta’s office vacancy rate showed no change between quarters. In addition, the total amount of vacant space in the market dropped only slightly. The reason for the slight movement is mostly due to third quarter activity being negative for Class B and Class C buildings. The competitive arena for Class A office has led to very attractive lease proposals from landlords resulting in a flight to quality for some tenants. Companies find themselves in a position to lease higher quality space at a premium and subsequently move from ordinary, less desirable buildings.
CAP RATES
The office market in Atlanta is on track to end the year with more tenants having moved into space than moved out. Office vacancy could drop for the first time in twelve quarters. Like the previous three continued on page 2
ATLANTA OFFICE
NEW SUPPLY, ABSORPTION AND VACANCY RATES
UPDATE Atlanta Rental Rates Overall Market & Class A (per sq. ft.)
25%
10,000,000 $24.00
$24.00
8,000,000
$23.00
$23.00
2,000,000
10%
Market AVG
2010
2009
2008
2007
2006
(4,000,000)
5% 0%
Absorption
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2005
2010 2010
2009 2009
2008 2008
2007 2007
Class A
(2,000,000)
2004
0
$17.00
$17.00
2003
$18.00
$18.00
15%
2002
$19.00
$19.00
4,000,000
2001
$20.00
$20.00
Square Feet
$21.00
$21.00
20%
6,000,000
$22.00
$22.00
Deliveries
Vacancy %
The Atlanta office market posted its third consecutive period of absorption in third quarter bringing the year-to-date total to 223,402 SF. Office vacancy showed little change. Only one building of 21,000 SF delivered in the third quarter resulting in a year-to-date total of 1,834,024 SF. Total office inventory remains at just over 201 million square feet.