YEAR-END 2010 | OFFICE
ATLANTA
MARKET REPORT
Activity Positive Throughout 2010 for Atlanta Office
MARKET INDICATORS Q4 2010
NEXT QTR
Atlanta’s office market returned to positive territory in 2010 following a substantial exodus of tenants from the prior year. Occupancy levels increased in all four quarters this year with the final three months seeing the largest increase. Net absorption for 2010 totaled 821,275 square feet; modest compared to heyday levels in the middle part of the decade, but positive nonetheless and filling back almost half of the occupied space lost in 2009. As a result of the positive activity, the overall vacancy rate has shown minor drops over the past three quarters. During this period of time, almost 600,000 square feet of vacancies have been filled, dropping the rate 0.3% from first quarter’s all-time record high of 19.5%. The year’s largest move-ins were highlighted by the headquarter relocations of Novelis and NCR, and the new business line headquarters of GE Energy. These companies combined for a total of 357,000 square feet occupied. Other large move-ins for the year include Marsh & McLennan moving into 133,903 square feet in Buckhead and the Nuclear Regulatory Commission moving into 102,436 square feet Downtown. Regarding office rents, Atlanta’s overall rental rate showed its first quarterly increase in two years in the fourth quarter; however, the average is still down $0.10/sf from this time last year.
VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE
—
CAP RATES
—
There are many influential factors which could highlight the performance of Atlanta’s office market this year, though one stands out as most notable: ‘Buckhead, Buckhead, Buckhead’. The submarket led all other office markets in absorption for the year and was second only to Central Perimeter in total leasing activity. Buckhead would also be the source of other aspects characterizing the Atlanta office market in 2010. A number of tenants played ‘musical chairs’ within their current submarkets this year when it came to office relocation decisions. Buckhead saw a number of these transactions occur throughout the year as companies sought higher quality space and took advantage of attractive incentive packages offered from landlords of the submarket’s newest buildings. These landlords were also able to relocate a couple of national headquarters to the submarket including Sony Ericsson and Novelis. 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 fourth consecutive period of increased occupancy in fourth quarter and ended the year with absorption totaling 821,275 SF. Once again, office vacancy showed little change and the overall rate remains 0.4% higher than 2009. Eight buildings delivered in 2010 combining for a total of 1,896,524 SF. Office inventory remains at just over 201 million sq. ft.
MARKET REPORT | YEAR-END 2010 | OFFICE | ATLANTA
VACANCY & AVAILABILITY •
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
YEAR-END 2010 | Vacant Space By Type
•
Class A office absorption for 2010 was 998,201 SF. This is the strongest year of absorption for this product type since 2007. Buckhead accounted for 35% of the amount, most of which occurred in the submarket’s newest buildings.
•
Office leasing activity was slower than the past couple of years in 2010. Much of the same is expected going forward. Stronger job growth will be the catalyst to stronger leasing levels. YEAR-END 2010 | Net Absorption by Submarket 350,000
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.
300,000
150,000 100,000 50,000
NORTHWEST
CLASS C 2,766,850 SF VCY RATE = 17.6%
was developed specifically for a certain tenant to occupy. Can be either leased or owned by the tenant.
200,000
SOUTH ATLANTA
Build-to-Suit-A term describing property that
CLASS B 14,970,670 SF VCY RATE = 17.7%
NORTH FULTON
250,000
CLASS A 20,890,836 SF VCY RATE = 20.6%
NORTHLAKE
Leasing Activity-The volume of square
Fourth quarter absorption totaled 330,089 SF; the strongest of the year. Office absorption in Atlanta was positive in each quarter of 2010.
CENTRAL PERIMETER
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.
Office availabilities have slowly begun to come off the market. Unlike previous recoveries, there will be no quick fix to the amount of vacant office space in Atlanta. The good news is the market is moving forward, away from record high vacancy. This progress is expected to continue throughout 2011.
•
WEST ATLANTA
Deliveries-Buildings
•
Atlanta’s office vacancy rate finished the year 0.4% higher than year-end 2009. This amounts to roughly 1 million square feet added. The vacant space comes mostly from the delivery of almost 1.9 million square feet of new office.
DOWNTOWN
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.
NORTHEAST
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
Going forward, much of the same which occurred in 2010 is expected for Atlanta’s office market in the year to come. Though positive activity made its way back to the market, demand for space remains tepid thanks to a number of factors including uncertainty which still exists in the economy. Fortunately, confidence in an economic recovery, including commercial real estate, is beginning to emerge. For Atlanta, the diverse mix of industries which comprise the local economy will help keep the region on a solid footing to continue filling office vacancies created during the ‘Great Recession’. The technology, healthcare and business service sectors are expected to be the most active in 2011. Additionally, the metro area continues to be a hotspot for business relocation. It is likely Atlanta will become the new home for a few more companies in 2011.
Square Feet
DEFINITIONS
0
Class A
Class B
Class C
(50,000)
UPDATE Largest Transactions in the Market for 2010 SALES ACTIVITY PROPERTY
SUBMARKET
SALES DATE
SALE PRICE
SIZE SF
PRICE / SF
BUYER
Campanile
Midtown
9/8/2010
$36,000,000
446,626
$80.60
Dewberry Capital
9000 Central Park
Central Perimeter
5/4/2010
$31,944,979
204,632
$156.16
Cox Enterprises
Camp Creek Medical Ctr.
South Atlanta
3/2/2010
$19,550,000
80,500
$242.86
Healthcare Trust America
The Park @ McGinnis
North Fulton
2/5/2010
$17,600,000
201,544
$87.33
Allegiance Realty Corp.
LEASING ACTIVITY PROPERTY
SUBMARKET
TENANT
LANDLORD
SIZE SF
TYPE
One Atlantic Center
Midtown
Alston & Bird
Hines
340,000
Class A Renewal & Contraction
1100 Peachtree
Midtown
Kilpatrick Stockton
Manulife Financial
206,140
Class A Renewal
250 Williams Street
Downtown
InComm
Cousins Properties
189,675
Class A Renewal & Expansion
171 17th Street
Midtown
Wells Fargo
AIG
180,000
Class A Renewal
P. 2
| COLLIERS INTERNATIONAL
MARKET REPORT | YEAR-END 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 63 C 58 Total 146
13,387,559 8,035,246 3,221,266 24,644,071
2,103,883 686,547 410,768 3,201,198
15.7% 8.5% 12.8% 13.0%
490,464 4,080 494,544
3.7% 0.1% 2.0%
MIDTOWN A B C Total
34 75 19 128
14,419,025 4,964,370 524,768 19,908,163
3,268,483 576,880 82,592 3,927,955
22.7% 11.6% 15.7% 19.7%
197,903 66,733 11,424 276,060
BUCKHEAD A 51 B 42 C 24 Total 117
14,613,336 4,514,507 568,627 19,696,470
3,529,832 821,296 23,461 4,374,589
24.2% 18.2% 4.1% 22.2%
8,902,198 2,084,723 516,821 11,503,742
SUBURBAN CENTRAL PERIMETER A 76 19,059,449 B 131 7,880,038 C 57 1,437,311 Total 264 28,376,798 NORTH FULTON A 99 B 209 C 22 Total 330 NORTHWEST ATLANTA A 74 B 324 C 60 Total 458
ABSORPTION VCY CURR %
VCY PRIOR %
2,594,347 690,627 410,768 3,695,742
19.4% 8.6% 12.8% 15.0%
19.3% 8.4% 12.6% 14.9%
(11,093) (13,130) (6,355) (30,578)
260,330 (69,347) (23,584) 167,399
-
1.4% 1.3% 2.2% 1.4%
3,466,386 643,613 94,016 4,204,015
24.0% 13.0% 17.9% 21.1%
24.6% 13.6% 18.6% 21.7%
75,365 30,412 3,475 109,252
171,622 26,814 (17,506) 180,930
-
239,235 17,563 256,798
1.6% 0.4% 1.3%
3,769,067 838,859 23,461 4,631,387
25.8% 18.6% 4.1% 23.5%
26.1% 18.0% 4.1% 23.6%
50,606 (24,159) 26,447
349,404 (55,929) 31,108 324,583
21.0% 11.9% 12.0% 17.9%
927,602 88,376 11,424 1,027,402
2.2% 0.5% 0.3% 1.6%
9,829,800 2,173,099 528,245 12,531,144
23.2% 12.4% 12.2% 19.5%
23.4% 12.4% 12.2% 19.7%
114,878 (6,877) (2,880) 105,121
3,370,409 1,675,158 526,672 5,572,239
17.7% 21.3% 36.6% 19.6%
133,318 81,761 1,830 216,909
0.7% 1.0% 0.1% 0.8%
3,503,727 1,756,919 528,502 5,789,148
18.4% 22.3% 36.8% 20.4%
18.6% 21.1% 37.1% 20.2%
14,122,900 9,264,152 621,547 24,008,599
2,157,051 2,157,633 48,300 4,362,984
15.3% 23.3% 7.8% 18.2%
249,610 85,709 6,533 341,852
1.8% 0.9% 1.1% 1.4%
2,406,661 2,243,342 54,833 4,704,836
17.0% 24.2% 8.8% 19.6%
15,514,115 15,068,544 2,185,500 32,768,159
2,400,309 3,102,936 246,057 5,749,302
15.5% 20.6% 11.3% 17.5%
424,685 109,022 533,707
2.7% 0.7% 1.6%
2,824,994 3,211,958 246,057 6,283,009
NORTHEAST ATLANTA A 58 6,055,124 B 301 11,850,553 C 37 1,075,431 Total 396 18,981,108
1,368,213 2,424,570 71,520 3,864,303
22.6% 20.5% 6.7% 20.4%
26,114 118,326 144,440
0.4% 1.0% 0.8%
NORTHLAKE A 21 B 277 C 92 Total 390
2,654,996 13,753,356 2,917,849 19,326,201
428,968 1,587,285 292,296 2,308,549
16.2% 11.5% 10.0% 11.9%
12,261 112,477 124,738
SOUTH ATLANTA A 19 B 187 C 52 Total 258
1,282,844 7,791,502 1,635,900 10,710,246
469,563 1,091,631 339,762 1,900,956
36.6% 14.0% 20.8% 17.7%
WEST ATLANTA A 1 B 36 C 21 Total 58
71,500 1,448,226 1,518,652 3,038,378
229,541 705,635 935,176
URBAN TOTAL A 110 B 180 C 101 Total 391
SUBURBAN TOTAL A 348 B 1,465 C 341 Total 2,154
42,419,920 17,514,123 4,314,661 64,248,704
58,760,928 67,056,371 11,392,190 137,209,489
ATLANTA MARKET GRAND TOTAL A 458 101,180,848 B 1,645 84,570,494 C 442 15,706,851 Total 2,545 201,458,193
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
-
$19.38 $18.63 $17.48 $19.10
752,710 752,710
-
$26.11 $17.12 $16.18 $24.10
-
908,852 908,852
-
$24.96 $18.44 $18.33 $23.58
781,356 (98,462) (9,982) 672,912
-
1,661,562 1,661,562
-
$23.48 $18.06 $17.33 $22.26
43,677 (96,013) 5,351 (46,985)
178,457 (155,569) (5,087) 17,801
-
-
-
$22.29 $18.78 $13.75 $20.82
18.6% 23.8% 6.3% 20.3%
217,149 (34,012) (15,904) 167,233
86,930 (57,243) (19,937) 9,750
-
-
-
$19.42 $15.80 $15.12 $18.14
18.2% 21.3% 11.3% 19.2%
17.5% 21.4% 11.7% 18.9%
(86,456) 16,045 10,718 (59,693)
(160,943) 159,944 (27,619) (28,618)
32,500 32,500
56,736 56,736
30,000 16,650 46,650
$20.63 $16.50 $14.47 $18.64
1,394,327 2,542,896 71,520 4,008,743
23.0% 21.5% 6.7% 21.1%
22.7% 21.6% 7.4% 21.2%
(16,991) 20,283 8,566 11,858
125,690 36,322 20,838 182,850
-
127,226 127,226
64,162 64,162
$19.64 $15.71 $15.67 $17.54
0.5% 0.8% 0.6%
441,229 1,699,762 292,296 2,433,287
16.6% 12.4% 10.0% 12.6%
16.5% 12.9% 11.0% 13.1%
(2,240) 71,795 28,606 98,161
(20,331) (53,409) 54,944 (18,796)
-
-
-
$19.16 $17.09 $14.68 $17.19
20,535 19,669 40,204
1.6% 0.3% 0.4%
490,098 1,111,300 339,762 1,941,160
38.2% 14.3% 20.8% 18.1%
39.9% 14.4% 21.7% 18.6%
22,014 37,493 14,672 74,179
1,462 (25,151) (1,058) (24,747)
30,000 30,000
51,000 51,000
45,000 45,000
$21.46 $18.49 $13.82 $18.76
15.8% 46.5% 30.8%
1,853 1,853
0.1% 0.1%
231,394 705,635 937,029
0.0% 16.0% 46.5% 30.8%
0.0% 16.5% 44.7% 30.2%
7,715 (27,500) (19,785)
5,580 5,049 (506) 10,123
-
-
-
$25.34 $19.56 $14.84 $18.70
10,194,513 12,268,754 2,230,242 24,693,509
17.3% 18.3% 19.6% 18.0%
866,523 528,817 8,363 1,403,703
1.5% 19.1% 19.7% 1.0%
11,061,036 12,797,571 2,238,605 26,097,212
18.8% 19.1% 19.7% 19.0%
19.1% 19.1% 19.9% 19.1%
177,153 23,306 24,509 224,968
216,845 (90,057) 21,575 148,363
32,500 30,000 62,500
183,962 51,000 234,962
75,000 80,812 155,812
$20.43 $17.42 $14.62 $18.54
19,096,711 14,353,477 2,747,063 36,197,251
18.9% 17.0% 17.5% 18.0%
1,794,125 617,193 19,787 2,431,105
1.8% 0.7% 0.1% 1.2%
20,890,836 14,970,670 2,766,850 38,628,356
20.6% 17.7% 17.6% 19.2%
20.9% 17.7% 17.8% 19.3%
292,031 16,429 21,629 330,089
998,201 (188,519) 11,593 821,275
32,500 30,000 62,500
1,845,524 51,000 1,896,524
75,000 80,812 155,812
$21.60 $17.08 $15.14 $19.67
2,431,105 2,666,512 2,722,158 3,026,650 3,339,206
1.2% 1.3% 1.4% 1.5% 1.7%
38,628,356 38,895,945 39,024,802 39,224,280 37,553,107
19.2% 19.3% 19.4% 19.5% 18.8%
19.3% 19.4% 19.5% 18.8% 18.3%
330,089 149,857 199,478 141,851 (929,561)
821,275 491,186 341,329 141,851 (1,687,290)
62,500 21,000 1,813,024 82,597
1,896,524 1,834,024 1,813,024 1,813,024 2,544,176
155,812 218,312 199,150 124,150 1,850,674
$19.67 $19.55 $19.64 $19.73 $19.77
QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q4-10 Q3-10 Q2-10 Q1-10 Q4-09
2,545 2,543 2,542 2,542 2,537
201,458,193 201,422,504 201,401,504 201,401,504 199,588,480
36,197,251 36,229,433 36,302,644 36,197,630 34,213,901
18.0% 18.0% 18.0% 18.0% 17.1%
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 | YEAR-END 2010 | OFFICE | ATLANTA
CONSTRUCTION •
Eight buildings totaling 1,896,524 SF delivered in 2010. Almost 88% of that amount occurred in Midtown and Buckhead.
•
In the fourth quarter, the average rental rate increased from the prior period. This suggests a bounce, or that rents are close to bottoming.
•
Office development is the lowest in Atlanta since statistics have been kept. Construction levels are expected to remain low for some time to come; likely a couple of more years.
•
Concessions still remain attractive and aggressive, though some pullback by landlords is beginning to take shape.
480 offices in 61 countries on 6 continents United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95
INVESTMENT & SALES ACTIVITY RENTAL RATES & CONCESSIONS •
•
The overall average rental rate for office is down $0.10/sf from 2009.
The number of office investment sales in 2010 was about the same as 2009; however, total sales volume was almost double last year’s amount.
•
$2 billion in annual revenue
• Over 2 billion square feet under
management
2010 DELIVERIES (100,000 SF+)
• Over 15,000 professionals
PROPERTY ADDRESS
SUBMARKET
SIZE (SF)
DELIVERY DATE
1075 Peachtree
Midtown
752,710
First Quarter 2010
Phipps Tower
Buckhead
472,267
First Quarter 2010
UNITED STATES:
3630 Peachtree
Buckhead
436,585
First Quarter 2010
631 Professional Dr.
Northeast Atlanta
127,226
First Quarter 2010
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
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 N . 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
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MIDTOWN DECATUR DE ECA ATUR Avondale Estates Estate
DOWNTOWN
o
W AL TO N
CO .
att
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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.
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