YEAR-END 2012 | OFFICE
ATLANTA
MARKET REPORT
Atlanta Office Market Recovery Takes Hold in 2012
Updated May 2012
MARKET INDICATORS Projected
Q4 2012 VACANCY
Q1 2013
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NET ABSORPTION CONSTRUCTION RENTAL RATE
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CAP RATES
Coasting to the end of its best performing year since 2007, Atlanta’s office market experienced yet another quarter of occupancy gains during the final three months of 2012. The positive results bring the final tally for office space absorbed in the year to almost 2.8 million square feet. This gain coupled with 790,000 square feet of space delivered resulted in a year-end vacancy rate of 17%; down 100 basis points from the end of 2011. Throughout 2012, the majority of the positive activity centered around three contributing factors: companies taking occupancy from previously signed transactions, companies expanding in and/or relocating to the Atlanta area, and the growth of small businesses. Some of Atlanta’s office absorption in the year was a result of the commencements of transactions signed in 2010 and 2011 when companies took advantage of opportunistic market conditions and secured competitive lease structures. Many of these transactions included expansions of existing office space, though some also included consolidations. The most notable of these occupancies in 2012 included Kids II relocating and expanding into 102,818 square feet in Buckhead, SunTrust Robinson Humphrey expanding by 135,075 square feet in Buckhead, Greenberg Traurig moving to 93,466 square feet in Buckhead, PriceWaterhouseCoopers relocating within Midtown to 139,490 square feet and Alston & Bird consolidating from two Midtown office towers to one. Likely the most beneficial factor contributing to the bulk of this year’s office absorption was the expansion of existing companies in Atlanta and the relocation of others to the metro area. The most notable of these was also the largest lease transaction of the year. State Farm signed and moved into over 430,000 square feet of office space at 64 & 66 Perimeter Center in Central Perimeter. This transaction represented a new requirement to the city and was the result of an increase in State Farm’s customer service business. The new office created 500 jobs. Finally, small business growth in Atlanta provided a steady stream of positive activity throughout the year. According to SurePayroll, which tracks small business growth throughout the nation, Atlanta’s year-over-year growth in small business hiring topped 6% in 2012. This surpassed the national average which showed -1.3% over the same time. continued on page 2
ATLANTA OFFICE
NEW SUPPLY, ABSORPTION AND VACANCY RATES
UPDATE Atlanta Rental Rates Overall Market & Class A (per sq. ft.)
25%
6,000,000 $25.00 $25.00
5,000,000
$24.00 $24.00 $23.00 $23.00
3,000,000
1,000,000
Class A
Market AVG
2012
2011
2010
2009
2008
2007
5%
(2,000,000) (3,000,000)
0% Absorption
www.colliers.com/atlanta
2006
(1,000,000)
2005
2012 2012
2011 2011
2010 2010
2009 2009
$17.00 $17.00
10%
0
$18.00 $18.00
2004
$19.00 $19.00
15%
2,000,000
2003
$20.00 $20.00
Square Feet
$22.00 $22.00 $21.00 $21.00
20%
4,000,000
Deliveries
Vacancy %
Office occupancy in Atlanta finished the year with a net gain of approximately 2.8 million square feet. The overall vacancy rate for office space is now 17%, decreasing 100 basis points compared to last year. Seven buildings delivered in 2012, adding 790,000 SF of inventory to the market. Atlanta’s office market now consists of 221 million square feet.