Q3 2010 | OFFICE
ATLANTA
MARKET REPORT
Modest Q3 Office Absorption for Atlanta
MARKET INDICATORS Q3 2010
NEXT QTR
—
VACANCY NET ABSORPTION
—
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
www.colliers.com/atlanta
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.
MARKET REPORT | Q3 2010 | OFFICE | ATLANTA
VACANCY & AVAILABILITY •
Vacant Space-Space that is not currently occupied by a tenant, regardless of any lease obligation on the space.
•
Buckhead leads the office market with year-todate absorption totaling 266,162 SF. This comes as no surprise since leasing activity has been highest in the submarket. Many companies continue migrating to Buckhead in order to take advantage of attractive concessions.
•
Class A vacancy is down 0.3% from last quarter; the only building classification to experience a drop. This is the first time in three years the Class A vacancy rate decreased from the previous quarter.
•
Sublease availabilities increased for the first time in a year. This is most likely a factor of the early renewal trend occurring in the market.
Leasing activity remained steady throughout third quarter. Kilpatrick Stockton’s renewal for 206,140 SF in Midtown was the largest transaction.
Q3 2010 | Vacant Space By Type
Q3 2010 | Net Absorption by Submarket 300,000
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.
Build-to-Suit-A term describing property that
CLASS C 3,168,432 SF VCY RATE = 20.4%
was developed specifically for a certain tenant to occupy. Can be either leased or owned by the tenant.
150,000 100,000 50,000 0 (50,000)) (100,000)) (150,000))
Class A
Class B
Class C
SOUTH ATLANTA
CLASS B 15,216,595 SF VCY RATE = 18%
NORTHEAST
CLASS A 21,220,251 SF VCY RATE = 21%
NORTHWEST
200,000
CENTRAL PERIMETER
250,000
NORTH FULTON
Leasing Activity-The volume of square
Office absorption was positive for the third consecutive quarter.
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.
•
•
leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.
Deliveries-Buildings
The office vacancy rate in Atlanta remains at 19.7%. There has been no change to the overall vacancy rate in the past three quarters. Modest absorption is reason for this.
DOWNTOWN
Sublease Space-Space that has been
ABSORPTION & LEASING ACTIVITY
NORTHLAKE
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.
BUCKHEAD
Absorption (Net)-The net change in
three quarters, the final quarter of the year is expected to see occupancy levels rise once again. Coca-Cola’s move into 148,229 square feet and Fisher & Phillips move into 49,222 square feet will be among the largest move-ins for fourth quarter. In addition, a number of new leases and expansions ranging between 10,000 to 20,000 square feet are scheduled to take occupancy by year’s end. Office leasing has been consistently active in the year; third quarter was no exception. Though a number of the larger transactions completed this year have been intra-market leases, the total net effect to office space absorbed has been positive. For the time being, it appears Atlanta’s office market is on its way to recovery. Should economic forecasts predicting job growth at the beginning of next year hold true, absorption trends will continue to remain positive.
Square Feet
DEFINITIONS
(200,000))
UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY
SUBMARKET
SALES DATE
SALE PRICE
SIZE SF
PRICE / SF
BUYER
271 17th Street
Midtown
Sept. 2010
$75,000,000
548,039
$156.16
CBRE Investors
Campanile
Midtown
9/8/2010
$36,000,000
446,626
$80.60
Dewberry Capital
1355 Windward Concourse
North Fulton
7/8/2010
$11,300,000
102,569
$110.17
TA Realty Associates
Rockdale Medical Plaza
Northlake/I-20 East
9/30/2010
$9,800,000
40,000
$245
Senior Housing Prop. Tr.
LEASING ACTIVITY PROPERTY
SUBMARKET
TENANT
LANDLORD
SIZE SF
TYPE
1100 Peachtree
Midtown
Kilpatrick Stockton
Manulife
206,140
Class A Renewal
250 Williams St.
Downtown
InComm
Cousins Properties
189,675
Class A Renewal & Expansion
10 Glenlake North
Central Perimeter
Global Payments
Highwoods Properties
168,317
Class A Renewal
1150 Sanctuary Park
North Fulton
Coca-Cola
JP Morgan Investment
158,229
Class A Lease
P. 2
| COLLIERS INTERNATIONAL
MARKET REPORT | Q3 2010 | OFFICE | ATLANTA
UPDATE
Market Comparisons
VACANCY
BLDGS
CLASS
EXISTING PROPERTIES TOTAL SF
DIRECT VCY SF
DIRECT VCY %
SUB VCY SF
SUB VCY %
URBAN DOWNTOWN A 25 B 64 C 58 Total 147
13,474,195 8,096,782 3,366,482 24,937,459
2,065,199 657,227 596,704 3,319,130
15.3% 8.1% 17.7% 13.3%
509,667 2,770 512,437
3.8% 0.0% 2.1%
MIDTOWN A B C Total
33 74 19 126
14,184,836 4,956,861 524,768 19,666,465
3,327,082 572,613 86,067 3,985,762
23.5% 11.6% 16.4% 20.3%
239,366 75,131 11,424 325,921
BUCKHEAD A 51 B 43 C 24 Total 118
14,613,336 4,633,194 572,227 19,818,757
3,564,637 764,623 34,961 4,364,221
24.4% 16.5% 6.1% 22.0%
8,956,918 1,994,463 717,732 11,669,113
SUBURBAN CENTRAL PERIMETER A 76 18,958,819 B 131 7,907,368 C 57 1,437,311 Total 264 28,303,498 NORTH FULTON A 99 B 212 C 23 Total 334 NORTHWEST ATLANTA A 74 B 319 C 54 Total 447
ABSORPTION VCY CURR %
VCY PRIOR %
2,574,866 659,997 596,704 3,831,567
19.1% 8.2% 17.7% 15.4%
19.5% 8.1% 17.8% 15.6%
49,739 (2,738) 2,201 49,202
280,125 (38,717) (167,229) 74,179
-
1.7% 1.5% 2.2% 1.7%
3,566,448 647,744 97,491 4,311,683
25.1% 13.1% 18.6% 21.9%
26.3% 12.5% 15.8% 22.5%
165,930 (28,634) (14,676) 122,620
117,180 22,683 (20,981) 118,882
-
273,166 13,105 286,271
1.9% 0.3% 1.4%
3,837,803 777,728 34,961 4,650,492
26.3% 16.8% 6.1% 23.5%
28.1% 16.6% 8.1% 24.8%
263,132 (7,091) 11,500 267,541
241,352 5,202 19,608 266,162
21.2% 11.3% 16.1% 18.1%
1,022,199 91,006 11,424 1,124,629
2.4% 0.5% 0.3% 1.7%
9,979,117 2,085,469 729,156 12,793,742
23.6% 11.8% 16.3% 19.9%
24.7% 11.6% 16.3% 20.5%
478,801 (38,463) (975) 439,363
3,324,603 1,683,239 535,241 5,543,083
17.5% 21.3% 37.2% 19.6%
279,131 79,079 1,830 360,040
1.5% 1.0% 0.1% 1.3%
3,603,734 1,762,318 537,071 5,903,123
19.0% 22.3% 37.4% 20.9%
19.2% 21.0% 35.9% 20.6%
14,111,075 9,371,396 637,052 24,119,523
2,252,874 2,136,265 38,611 4,427,750
16.0% 22.8% 6.1% 18.4%
340,845 185,992 6,533 533,370
2.4% 2.0% 1.0% 2.2%
2,593,719 2,322,257 45,144 4,961,120
18.4% 24.8% 7.1% 20.6%
15,833,061 15,006,381 1,682,998 32,522,440
2,316,679 3,088,931 254,575 5,660,185
14.6% 20.6% 15.1% 17.4%
389,410 122,865 512,275
2.5% 0.8% 1.6%
2,706,089 3,211,796 254,575 6,172,460
NORTHEAST ATLANTA A 58 6,055,124 B 301 11,815,040 C 36 1,060,431 Total 395 18,930,595
1,356,282 2,508,846 80,786 3,945,914
22.4% 21.2% 7.6% 20.8%
30,209 119,626 149,835
0.5% 1.0% 0.8%
NORTHLAKE A 21 B 276 C 93 Total 390
2,654,996 13,881,247 3,080,610 19,616,853
426,728 1,694,409 483,663 2,604,800
16.1% 12.2% 15.7% 13.3%
12,261 104,079 116,340
SOUTH ATLANTA A 19 B 184 C 51 Total 254
1,282,844 7,567,611 1,617,798 10,468,253
494,149 1,153,817 346,234 1,994,200
38.5% 15.2% 21.4% 19.0%
WEST ATLANTA A 1 B 36 C 20 Total 57
71,500 1,449,920 1,516,552 3,037,972
230,565 691,803 922,368
URBAN TOTAL A 109 B 181 C 101 Total 391
SUBURBAN TOTAL A 348 B 1,459 C 334 Total 2,141
42,272,367 17,686,837 4,463,477 64,422,681
58,967,419 66,998,963 11,032,752 136,999,134
ATLANTA MARKET GRAND TOTAL A 457 101,239,786 B 1,640 84,685,800 C 435 15,496,229 Total 2,532 201,421,815
TOTAL VCY SF
DELIVERIES
NET NET NEW NEW ABSORP ABSORP SUPPLY SUPPLY CURR SF YTD SF CURR SF YTD SF
-
U/C
RENT
UNDER AVG CONSTR RENT SF RATE
-
$19.49 $15.49 $16.21 $18.31
752,710 752,710
-
$23.60 $17.44 $15.26 $22.49
-
908,852 908,852
-
$25.07 $18.78 $18.50 $23.93
638,657 (10,832) (168,602) 459,223
-
1,661,562 1,661,562
-
$22.72 $17.24 $16.66 $21.58
40,870 (100,643) (20,432) (80,205)
120,333 (33,817) (13,656) 72,860
-
-
-
$22.22 $18.67 $13.87 $20.75
18.3% 24.5% 5.3% 20.4%
(7,406) (29,942) (11,500) (48,848)
(100,128) (83,640) (6,533) (190,301)
-
-
-
$19.60 $15.78 $16.06 $18.14
17.1% 21.4% 15.1% 19.0%
17.3% 20.8% 14.8% 18.8%
29,518 (88,939) (5,992) (65,413)
(74,538) 99,017 (38,337) (13,858)
-
24,236 24,236
62,500 16,650 79,150
$20.67 $16.59 $12.70 $18.54
1,386,491 2,628,472 80,786 4,095,749
22.9% 22.2% 7.6% 21.6%
22.1% 21.9% 6.9% 21.1%
(47,542) (46,459) (7,808) (101,809)
131,729 24,112 9,892 165,733
-
127,226 127,226
64,162 64,162
$19.77 $15.60 $13.20 $17.34
0.5% 0.7% 0.6%
438,989 1,798,488 483,663 2,721,140
16.5% 13.0% 15.7% 13.9%
17.4% 12.7% 16.8% 14.0%
23,937 (35,864) 35,104 23,177
(18,091) (153,635) 26,338 (145,388)
-
-
-
$19.75 $17.16 $15.18 $17.39
17,963 19,669 37,632
1.4% 0.3% 0.4%
512,112 1,173,486 346,234 2,031,832
39.9% 15.5% 21.4% 19.4%
36.8% 14.2% 20.3% 17.9%
(39,436) (83,660) (18,612) (141,708)
(20,552) (111,344) (13,530) (145,426)
21,000 21,000
21,000 21,000
45,000 30,000 75,000
$21.19 $18.17 $13.44 $18.48
15.9% 45.6% 30.4%
3,744 3,744
0.3% 0.1%
234,309 691,803 926,112
0.0% 16.2% 45.6% 30.5%
0.0% 17.3% 45.1% 30.7%
16,077 (8,013) 8,064
5,580 (266) 15,245 20,559
-
-
-
$25.34 $19.51 $10.52 $15.98
10,171,315 12,496,072 2,430,913 25,098,300
17.2% 18.7% 22.0% 18.3%
1,069,819 635,054 8,363 1,713,236
1.8% 19.6% 22.1% 1.3%
11,241,134 13,131,126 2,439,276 26,811,536
19.1% 19.6% 22.1% 19.6%
19.1% 19.0% 21.8% 19.3%
(59) (369,430) (37,253) (406,742)
44,333 (259,573) (20,581) (235,821)
21,000 21,000
151,462 21,000 172,462
107,500 110,812 218,312
$20.53 $17.35 $13.57 $18.09
19,128,233 14,490,535 3,148,645 36,767,413
18.9% 17.1% 20.3% 18.3%
2,092,018 726,060 19,787 2,837,865
2.1% 0.9% 0.1% 1.4%
21,220,251 15,216,595 3,168,432 39,605,278
21.0% 18.0% 20.4% 19.7%
21.4% 17.5% 20.2% 19.7%
478,742 (407,893) (38,228) 32,621
682,990 (270,405) (189,183) 223,402
21,000 21,000
1,813,024 21,000 1,834,024
107,500 110,812 218,312
$21.65 $16.86 $14.35 $19.55
2,837,865 2,790,039 3,069,548 3,422,029 3,478,427
1.4% 1.4% 1.5% 1.7% 1.7%
39,605,278 39,616,899 39,676,782 37,994,656 36,960,025
19.7% 19.7% 19.7% 19.0% 18.5%
19.7% 19.7% 19.0% 18.5% 17.7%
32,621 59,883 130,898 (952,034) (442,806)
223,402 190,781 130,898 (1,961,970) (1,009,936)
21,000 1,813,024 82,597 1,365,173
1,834,024 1,813,024 2,544,176 2,461,579
218,312 199,150 124,150 1,850,674 1,933,271
$19.55 $19.65 $19.73 $19.78 $19.84
QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q3-10 Q2-10 Q1-10 Q4-09 Q3-09
2,532 2,531 2,531 2,526 2,524
201,421,815 201,400,815 201,400,815 199,587,791 199,505,194
36,767,413 36,826,860 36,607,234 34,572,627 33,481,598
18.3% 18.3% 18.2% 17.3% 16.8%
NOTE: STATISTICAL SET INCLUDES OFFICE PROPERTIES 15,000 SF AND UP, EXCLUDING SINGLE-TENANT OWNEROCCUPIED. 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 | Q3 2010 | OFFICE | ATLANTA
CONSTRUCTION •
•
•
The development horizon for larger office buildings is still at least two to three years out.
RENTAL RATES •
•
480 offices in 61 countries on 6 continents
building classifications in third quarter. The rate decreased by $0.12/sf.
Only seven office buildings are currently under construction in Atlanta; all of them are under 100,000 SF, and all of them are in suburban markets.
Rents are likely to continue declining through the end of the year. They are expected to show more stabilization at the beginning of next year, and possibly a bit of an increase by the end of 2011.
United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95
INVESTMENT & SALES ACTIVITY
Average rental rates are down for the tenth straight quarter. The overall average decreased by $0.10/sf from second quarter.
•
Class A’s average rent had the largest drop of
Atlanta office sales continue to show improvement. Around 20 properties over $1M sold in third quarter. The distribution is about half and half between investment and user sales.
•
$2 billion in annual revenue
• Over 2 billion square feet under
management • Over 15,000 professionals
CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS
SUBMARKET
SIZE (SF)
DELIVERY DATE
NONE 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
N
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
o
W AL TO N
CO .
att
ho ac
ATLANTA
e
Snellville
Stone Mountain G W IN NE TT
r
R iv
e
PAULDING CO.
DEKALB CO. C FULTON CO. C
Powder Springs
Ch
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 Mike Spears SIOR Senior VP | Colliers Manager 1349 West Peachtree Street Suite 1100 Atlanta, Georgia, 30309 TEL +1 404 888 9000 FAX +1 404 870 2845
RESEARCHER: Atlanta Scott Amoson Director of Research 1349 West Peachtree Street Suite 1100 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 480 offices throughout more than 61 countries worldwide.
Accelerating success.
www.colliers.com/atlanta