3Q 2011 | Atlanta Office | Market Report by Colliers International

Q3 2011 | OFFICE

ATLANTA

MARKET REPORT

Atlanta Office Positive for Second Straight Quarter

MARKET INDICATORS Projected

Q3 2011

Q4 2011

—

VACANCY NET ABSORPTION

—

CONSTRUCTION

—

RENTAL RATE

—

CAP RATES

For the fifth time in six quarters, Atlanta’s office market saw more space filled than vacated. Office absorption totaled 146,336 square feet in the third quarter; marking the second consecutive period with an increase in occupied space. Year-to-date, Atlanta has seen its office occupancy increase by almost 430,000 square feet. Buckhead once again continues to show its dominance over Atlanta’s other office submarkets with more than 350,000 square feet of positive absorption in the third quarter; bringing the submarket’s yearly total to 628,786 square feet. Elsewhere, Downtown, Northwest Atlanta, Northeast Atlanta and Northlake were the only other submarkets to see positive office absorption in the quarter. Central Perimeter and Midtown continue to show weakness; but mostly in Class B product. This is not surprising given the ongoing trend of companies taking advantage of market conditions in order to upgrade the quality of their office space. After three quarters of leading the Atlanta market in space absorption, North Fulton saw its occupancy decrease in third quarter. This is due to AT&T’s consolidation from the submarket to its Midtown campus. On the whole, the real story this quarter was the continued growth in buildings between 10,000 to 70,000 square feet. Like second quarter, the majority of move-ins over the past three months were from tenants in these buildings; accounting for 84% of total market absorption. This occupancy gain came from small business growth in the area. It was recently reported Atlanta’s small businesses increased their hiring by 3% in September. This directly correlates to the positive activity which took place in Atlanta’s smaller office buildings this quarter. The Atlanta office market is poised for its strongest year of occupancy gain since before the “Great Recession”. Despite modest market conditions, office absorption in the final quarter of 2011 is expected to be positive for the third consecutive time; resulting in a total of 500,000+ square feet of Atlanta office space absorbed in 2011. Nevertheless, new leasing activity remains subdued; because of this, the outlook going forward is tempered. The absorption experienced so far this year has been the result of continued on page 2

ATLANTA OFFICE

NEW SUPPLY, ABSORPTION AND VACANCY RATES

UPDATE Atlanta Rental Rates Overall Market & Class A (per sq. ft.)

7,000,000 $25.00

$25.00

25%

6,000,000

$24.00

5,000,000

$23.00

20%

$23.00

4,000,000

Market AVG

2011

2010

(3,000,000)

5% 0%

Absorption

www.colliers.com/atlanta

2009

(2,000,000)

2008

(1,000,000)

2007

2011 2011

2010 2010

2009 2009

2008 2008

Class A

10%

0 2006

$17.00

1,000,000 2005

$18.00

15%

2004

$19.00

3,000,000 2,000,000

2003

$20.00

Square Feet

$21.00

2002

$22.00

Deliveries

Vacancy %

The Atlanta office market saw occupancy increase for the second consecutive quarter in Third Quarter 2011. Year-to-date absorption now totals positive 427,694 SF. Vacancy is down slightly from last quarter, and 0.2% down from a year ago. Construction activity remained unchanged in the third quarter.

MARKET REPORT | Q3 2011 | OFFICE | ATLANTA

VACANCY & AVAILABILITY •

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

Due to the modest absorption in the quarter, the vacancy rates for Class A, B & C product showed little to no movement.

•

Buckhead’s office vacancy rate is below 20% for the first time since the end of 2009.

•

The overall vacancy rate for Atlanta office is not expected to deviate from where it currently stands. In total, 2011 should see a modest decrease in vacancy from 2010. Q3 2011 | Vacant Space By Type

•

The largest transactions finalized over the past three months were renewals by existing companies in the market including Atlanta Gas Light, SunTrust Robinson Humphrey and GE Consumer Finance. Along with its renewal, SunTrust Robinson expanded by 140,000 SF.

•

Buckhead saw the largest occupancy gain in the third quarter. Over 660,000 SF of office space has been filled here year-to-date.

•

Overall, modest activity persists in the market. Q3 2011 | Net Absorption by Submarket

Build-to-Suit-A term describing property that

CLASS C 3,690,444 SF VCY RATE = 18.1%

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

200,000 100,000 0

(100,000)) (200,000))

Class A

Class B

Class C

NORTH FULTON

CLASS B 15,915,643 SF VCY RATE = 17.8%

MIDTOWN

CLASS A 19,323,588 SF VCY RATE = 17.8%

SOUTH ATLANTA

300,000

CENTRAL PERIMETER

400,000

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.

WEST ATLANTA

Leasing Activity-The volume of square

Office absorption was positive for the second consecutive quarter and is on track to finish the year above 500,000 SF.

DOWNTOWN

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.

•

NORTHWEST

Deliveries-Buildings

Atlanta’s office vacancy rate is down from this time last year, but only by 0.2%. The amount of vacant space on the market still remains close to 39 million square feet.

•

Sublease Space-Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation.

ABSORPTION & LEASING ACTIVITY

NORTHLAKE

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.

NORTHEAST

Absorption (Net)-The net change in

transactions which occurred during the latter half of 2010, and beginning of 2011 when the economy was expanding; albeit at a moderate pace. Since then, more uncertainty has emerged, and as a result, activity has become restrained. As mentioned, much of Atlanta’s activity this year has been from small business growth. With a less than desirable economic climate, this growth could contract due to a drop in the confidence levels of small businesses. Atlanta will need to continue attracting major company relocations and expansions in order to maintain positive absorption levels in the coming year. This will require highly desirable incentive packages from state and local leaders given the increased competition from neighboring metropolitan markets such as Nashville, Charlotte and Tampa Bay.

Square Feet

DEFINITIONS

(300,000))

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

Riverwood 100

Northwest Atlanta

9/16/2011

$81,500,000

502,527

$162.18

Highwoods Properties

6625 The Corners Pkwy.

Northeast Atlanta

7/6/2011

$14,100,000

101,426

$139.02

Rosemont Realty

5707 Peachtree Pkwy.

Northeast Atlanta

7/6/2011

$13,800,000

100,000

$138

Rosemont Realty

3585 Engineering Dr.

Northeast Atlanta

7/6/2011

$13,600,000

98,092

$138.65

Rosemont Realty

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

Ten Peachtree Place

Midtown

Atlanta Gas Light

Cousins

260,000

Class A Renewal

Atlanta Financial Center

Buckhead

SunTrust Robinson Humphrey

Hines

229,894

Class A Renewal & Expansion

Windward Plaza 300

North Fulton

GE Consumer Finance

EOLA Capital

203,248

Class A Renewal

Paces West

Northwest Atlanta

Piedmont Healthcare

Behringer Harvard

190,000

Class A Renewal & Expansion

P. 2

| COLLIERS INTERNATIONAL

MARKET REPORT | Q3 2011 | OFFICE | ATLANTA

UPDATE

Market Comparisons

VACANCY

BLDGS

CLASS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY SF

DIRECT VCY %

URBAN DOWNTOWN A 28 B 81 C 79 Total 188

14,770,027 8,756,770 3,578,497 27,105,294

2,006,454 1,004,890 774,623 3,785,967

13.6% 11.5% 21.6% 14.0%

549,605 1,310 550,915

3.7% 0.0% 2.0%

MIDTOWN A B C Total

38 100 38 176

15,195,101 6,106,807 898,751 22,200,659

3,014,710 1,074,726 72,594 4,162,030

19.8% 17.6% 8.1% 18.7%

200,936 2,695 11,424 215,055

BUCKHEAD A 52 B 52 C 43 Total 147

15,099,004 4,445,020 1,060,897 20,604,921

2,900,455 750,222 91,684 3,742,361

19.2% 16.9% 8.6% 18.2%

7,921,619 2,829,838 938,901 11,690,358

SUBURBAN CENTRAL PERIMETER A 69 19,746,298 B 141 7,617,595 C 96 1,677,788 Total 306 29,041,681 NORTH FULTON A 98 B 329 C 57 Total 484

17.3% 11.5% 21.6% 16.0%

17.8% 11.6% 21.0% 16.2%

67,889 12,441 (23,425) 56,905

281,279 (372,989) (68,561) (160,271)

$19.44 $14.86 $14.27 $18.08

1.3% 0.0% 1.3% 1.0%

3,215,646 1,077,421 84,018 4,377,085

21.2% 17.6% 9.3% 19.7%

20.8% 17.5% 7.8% 19.4%

(54,390) (8,694) (13,592) (76,676)

54,981 (288,815) (6,037) (239,871)

$24.89 $17.96 $11.51 $23.07

150,531 23,928 174,459

1.0% 0.5% 0.8%

3,050,986 774,150 91,684 3,916,820

20.2% 17.4% 8.6% 19.0%

22.3% 18.2% 8.5% 20.7%

321,738 32,846 (1,926) 352,658

660,045 17,393 (48,652) 628,786

$24.83 $18.36 $18.37 $23.58

17.6% 14.7% 17.0% 16.7%

901,072 27,933 11,424 940,429

2.0% 0.1% 0.2% 1.3%

8,822,691 2,857,771 950,325 12,630,787

19.6% 14.8% 17.2% 18.1%

20.3% 15.0% 16.5% 18.5%

335,237 36,593 (38,943) 332,887

996,305 (644,411) (123,250) 228,644

$23.05 $17.06 $14.72 $21.58

3,449,120 2,103,537 400,130 5,952,787

17.5% 27.6% 23.8% 20.5%

79,969 99,217 179,186

0.4% 1.3% 0.6%

3,529,089 2,202,754 400,130 6,131,973

17.9% 28.9% 23.8% 21.1%

17.5% 28.3% 24.3% 20.7%

(72,673) (46,151) 7,414 (111,410)

(15,803) (304,631) 38,328 (282,106)

15,235,499 11,558,028 979,464 27,772,991

1,991,012 1,934,075 87,904 4,012,991

13.1% 16.7% 9.0% 14.4%

186,890 57,631 6,533 251,054

1.2% 0.5% 0.7% 0.9%

2,177,902 1,991,706 94,437 4,264,045

14.3% 17.2% 9.6% 15.4%

12.4% 17.9% 12.1% 14.7%

(286,966) 82,590 24,483 (179,893)

53,120 269,903 15,444 338,467

$19.99 $14.08 $13.85 $17.15

NORTHEAST ATLANTA A 57 7,348,057 B 409 13,495,245 C 118 2,219,308 Total 584 23,062,610

1,307,349 2,714,291 227,348 4,248,988

17.8% 20.1% 10.2% 18.4%

91,524 83,138 3,595 178,257

1.2% 0.6% 0.2% 0.8%

1,398,873 2,797,429 230,943 4,427,245

19.0% 20.7% 10.4% 19.2%

19.5% 20.9% 11.1% 19.5%

35,877 29,325 15,656 80,858

7,523 500 7,766 15,789

$19.68 $13.90 $13.43 $15.90

NORTHLAKE A 19 B 334 C 166 Total 519

2,510,795 12,408,862 3,565,819 18,485,476

351,350 1,529,442 509,646 2,390,438

14.0% 12.3% 14.3% 12.9%

18,338 78,937 97,275

0.7% 0.6% 0.5%

369,688 1,608,379 509,646 2,487,713

14.7% 13.0% 14.3% 13.5%

14.9% 13.4% 14.5% 13.9%

5,168 60,530 7,026 72,724

25,745 51,152 31,717 108,614

$20.01 $17.08 $14.55 $17.10

NORTHWEST ATLANTA A 77 B 423 C 142 Total 642

17,450,997 15,972,884 2,420,064 35,843,945

2,451,466 3,047,164 338,035 5,836,665

14.0% 19.1% 14.0% 16.3%

188,068 128,393 1,700 318,161

1.1% 0.8% 0.1% 0.9%

2,639,534 3,175,557 339,735 6,154,826

15.1% 19.9% 14.0% 17.2%

15.6% 19.7% 13.3% 17.3%

80,720 (28,581) (17,294) 34,845

188,978 (47,537) (23,083) 118,358

16,650 16,650

$21.34 $15.29 $14.46 $18.12

SOUTH ATLANTA A 17 B 227 C 115 Total 359

1,302,124 8,054,176 2,252,825 11,609,125

367,848 1,135,758 418,396 1,922,002

28.2% 14.1% 18.6% 16.6%

17,963 41,101 59,064

1.4% 0.5% 0.5%

385,811 1,176,859 418,396 1,981,066

29.6% 14.6% 18.6% 17.1%

31.9% 13.6% 16.6% 16.2%

29,010 (84,973) (43,360) (99,323)

27,027 (145,308) 17,508 (100,773)

19,015 19,015

$20.92 $16.01 $13.76 $16.67

WEST ATLANTA A B 48 C 33 Total 81

1,242,232 1,720,418 2,962,650

105,188 746,832 852,020

8.5% 43.4% 28.8%

105,188 746,832 852,020

8.5% 43.4% 28.8%

9.2% 43.8% 29.3%

8,948 6,700 15,648

17,290 (16,589) 701

$16.80 $12.37 $14.07

9,918,145 12,569,455 2,728,291 25,215,891

15.6% 17.9% 18.4% 16.9%

582,752 488,417 11,828 1,082,997

0.9% 18.6% 18.5% 0.7%

10,500,897 13,057,872 2,740,119 26,298,888

16.5% 18.6% 18.5% 17.7%

16.2% 18.6% 18.5% 17.6%

(208,864) 21,688 625 (186,551)

286,590 (158,631) 71,091 199,050

19,015 19,015

600,000 32,650 632,650

$20.63 $15.86 $13.73 $17.01

17,839,764 15,399,293 3,667,192 36,906,249

16.4% 17.2% 18.0% 16.9%

1,483,824 516,350 23,252 2,023,426

1.4% 0.6% 0.1% 0.9%

19,323,588 15,915,643 3,690,444 38,929,675

17.8% 17.8% 18.1% 17.8%

17.9% 17.8% 17.9% 17.9%

126,373 58,281 (38,318) 146,336

1,282,895 (803,042) (52,159) 427,694

19,015 19,015

600,000 32,650 632,650

$21.79 $15.69 $13.98 $18.84

2,023,426 2,111,098 2,253,455 2,530,670 2,675,081

0.9% 1.0% 1.0% 1.2% 1.2%

38,929,675 39,076,011 39,405,314 39,338,354 39,411,804

17.8% 17.9% 18.0% 18.0% 18.0%

17.9% 18.0% 18.0% 18.0% 18.0%

146,336 329,303 (47,945) 165,456 3,791

427,694 281,358 (47,945) 383,128 217,672

19,015 19,015 19,015 1,933,794 1,841,788

632,650 632,650 616,650 635,665 708,656

$18.84 $19.02 $19.21 $19.16 $19.40

SUBURBAN TOTAL A 337 B 1,911 C 727 Total 2,975

63,593,770 70,349,022 14,835,686 148,778,478

ATLANTA MARKET GRAND TOTAL A 455 108,657,902 B 2,144 89,657,619 C 887 20,373,831 Total 3,486 218,689,352

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

RENT

2,556,059 1,006,200 774,623 4,336,882

TOTAL VCY SF

U/C

VCY PRIOR %

45,064,132 19,308,597 5,538,145 69,910,874

SUB VCY %

DELIVERIES

VCY CURR %

URBAN TOTAL A 118 B 233 C 160 Total 511

SUB VCY SF

ABSORPTION

UNDER AVG CONSTR RENT SF RATE

600,000 16,000 616,000

$21.85 $17.86 $13.70 $20.07

QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q3-11 3,486 218,689,352 36,906,249 Q2-11 3,486 218,689,352 36,964,913 Q1-11 3,486 218,689,352 37,151,859 Q4-10 3,485 218,670,337 36,807,684 Q3-10 3,483 218,578,331 36,736,723

16.9% 16.9% 17.0% 16.8% 16.8%

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.

19,015 92,006 -

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 3

MARKET REPORT | Q3 2011 | OFFICE | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

There was no change in construction activity in the third quarter.

•

AMD’s 153,000 SF data center and Primerica’s 345,000 SF build-to-suit, both in Northeast Atlanta, will be the next two projects to go under construction.

•

A couple of new office buildings were recently announced; however, neither will go under construction until preleasing requirements are met. The buildings are Northpark 700 in Central Perimeter at 430,000 SF and 285 Marietta St. in Downtown at 350,000 SF.

•

The average rental rate for Atlanta office space dropped yet again in third quarter. With economic conditions where they are, asking rents are likely to continue their downward trend.

•

Although concessions are becoming tighter, it still remains a tenant’s market in Atlanta.

512 offices in 61 countries on 6 continents United States: 125 Canada: 38 Latin America: 18 Asia Pacific: 214 EMEA: 117

INVESTMENT & SALES ACTIVITY •

Third quarter investment volume was higher than the previous quarter. Over $193 million of office properties traded hands in the past three months.

•

$1.5 billion in annual revenue

• Over 2.2 billion square feet under

management • Over 13,000 professionals

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

UNITED STATES: Atlanta Mike Spears SIOR Senior VP | Colliers Manager Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309

6205 Peachtree Dunwoody Rd. - 1

Central Perimeter

300,000

Second Quarter 2012

6205 Peachtree 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 .

ATLANTA

MIDTOWN DE ECA ATUR DECATUR Avondale Estate Estates

DOWNTOWN

W AL TO N

CO .

att

ho ac

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.

TEL +1 404 888 9000 FAX +1 404 870 2845

RESEARCHER: Atlanta Scott Amoson 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 512 offices throughout more than 61 countries worldwide.

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