YEAR-END 2011 | OFFICE
ATLANTA
MARKET REPORT
Slow, Steady Growth for Atlanta Office in 2011
MARKET INDICATORS Projected
Q4 2011
Q1 2012
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VACANCY NET ABSORPTION
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CONSTRUCTION RENTAL RATE
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CAP RATES
The Atlanta office market wrapped up the year with its strongest quarter of absorption in 4.5 years. Occupancy increased by 556,476 square feet in the fourth quarter, bringing the year-to-date total for 2011 to just over 811,000 square feet. Yet again, Atlanta experienced positive results in an unsettled economy. Buckhead led all Atlanta office submarkets, as expected, accounting for almost all of 2011’s space absorption. The largest occupiers in 2011 were mostly existing tenants in the Atlanta area. The majority of these tenants took advantage of the depressed market conditions over the past couple of years, relocating to higher quality space at a discount. Six of the top ten largest move-ins of the year occurred in the fourth quarter including InComm which doubled its 90,000 SF space at 250 Williams Street Downtown, Regions Bank which consolidated from multiple offices across the market into 80,000 SF at Atlantic Center Plaza in Midtown and the Reznick Group which also consolidated offices into 77,049 SF at Two Alliance Center in Buckhead. The foremost trend in the office market in 2011 was the flight to quality by tenants. This is most apparent when looking at the year-end absorption results of Class A and Class B properties. Tenants chose Class A properties overwhelmingly, taking advantage of favorable rental rates and absorbing over 1.6 million square feet of space this year. Meanwhile, Class B properties saw occupancy decrease by 850,000 square feet over the same period of time. As far as vacancy, Atlanta is somewhat in parity. All space types and the market as a whole are 17.8% vacant. Regardless of how modest activity might be, consecutive years of occupancy gains provide momentum in Atlanta’s office market; moving the city that much closer towards recovery. Heading into 2012, much of the same factors which contributed to the positive activity in the past year will continue. So long as Class A rental rates remain favorable, the flight to quality will remain prominent. Small business growth, which averaged a 3% increase in monthly hiring over the past six months and also accounted for 15% of continued on page 2
Class A
2011 2011
2010 2010
2009 2009
Market AVG
2011
2010
5% 0%
Absorption
www.colliers.com/atlanta
2009
$17.00 $17.00
10% 2008
$18.00 $18.00
2007
$19.00 $19.00
2006
$20.00 $20.00
15%
2005
$21.00 $21.00
2004
$22.00 $22.00
20%
2003
$23.00 $23.00
25%
2002
$25.00 $25.00 $24.00 $24.00
7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 (1,000,000) (2,000,000) (3,000,000) (4,000,000)
Square Feet
Atlanta Rental Rates Overall Market & Class A (per sq. ft.)
2008 2008
ATLANTA OFFICE
NEW SUPPLY, ABSORPTION AND VACANCY RATES
UPDATE
Deliveries
Vacancy %
The Atlanta office market saw occupancy increase for the second consecutive year in 2011. Absorption topped 811,000 SF, bringing the overall vacancy rate down to 17.8%. Only one building of 19,015 SF delivered in 2011. Construction work began on Primerica’s build-tosuit and Jamestown’s Ponce City Market in the fourth quarter.