Metro Atlanta Office
Q1 2022
Atlanta Office Market Takes Step Back to Start 2022 After two straight quarters of positive absorption, the Atlanta office market took a step back in Q1 of 2022 with negative absorption of (750,657) square feet. The market’s overall vacancy rate rose 60 basis points (0.6%), the first vacancy rate increase since Q2 of 2021. Over the past 12 months, Atlanta has experienced negative absorption of (110,047) square feet. While slightly negative, this is the third-best absorption figure among the 10 largest national office markets.
20.8%
(750,657)
vacancy rate
net absorp Q1
4,020,628
$30.12
sf under constr
asking rent
Downtown was Atlanta’s top performing submarket in Q1, absorbing 28,274 square feet. Atlanta’s urban submarkets remained the nucleus of activity, with large moves in Midtown and Buckhead. This included Swift Currie occupying 99,862 square feet at Pershing Park Plaza, SPACES moving into 56,452 at Star Metals, and Amazon taking 50,432 at Terminus 200 in Buckhead. The quarter was not without move-outs, which was highlighted by Norfolk Southern vacating over 250,000 square feet at Promenade Central as they move into their 750,000 sf built-tosuit headquarters at Tech Square in Midtown.
In the last 12 months Atlanta has seen a 1.3% rise in vacancy rate and negative absorption of (110k) sf
1,500,000 1,000,000 500,000 0 ‐500,000 ‐1,000,000 ‐1,500,000 ‐2,000,000 ‐2,500,000 ‐3,000,000 ‐3,500,000
(110,047) net absorp last 12 months
2.9M 3.2% 3.6% ATL total nonfarm employment
ATL unemployment rate
US unemployment rate
Source: U.S. Bureau of Labor Statistics; LPC Research
Absorption and Vacancy Rate ABSORPTION AND VACANCY RATE
22% 20%
Q3 2019
Q1 2020
Q3 2020
Q1 2021
Q3 2021
Q1 2022
18% 16% 14% 12%
Absorption
Vacancy Rate
Source: CoStar; LPC Research
LEASING ACTIVITY There were over 2.6 million square feet worth of signed leases in Q1, led by several large Midtown deals. Micron (93,072 square feet at 712 West Peachtree), Outreach Corporation (32,927 square feet at Star Metals), and Kimley-Horn (30,652 square feet at Promenade Central) were among the 68 leases signed in Midtown in Q1. The Atlanta office market has averaged 2.75 million square feet of signed leases over the past four quarters: this is higher than the numbers in 2020 at the height of the pandemic (1.9 million sf average), but still not back to the levels seen in 2018-2019 (3.6 million sf average). TOP LEASES Q1 2022 Tenant
Property
Submarket
Landlord
SF
Lease Type
Micron
712 West Peachtree
Midtown
Portman Holdings
93,072
New Lease
3100 Breckinridge Blvd
Northeast
TerraCap Management
50,000
New Lease
Outreach Corporation
Star Metals Offices
Midtown
The Allen Morris Company
32,927
New Lease
Kimley-Horn
Promenade Central
Midtown
Cousins Properties
30,652
New Lease
One Glenlake
Central Perimeter
Starwood Capital Group
26,693
Expansion
Trenton Systems
IRB Holding Corp.
lpcsoutheast.com The information contained herein has been obtained from the owner of the property or from a source deemed reliable. While Lincoln Property Company has no reason to doubt its accuracy, we do not guarantee it.
METRO ATLANTA OFFICE MARKET Q1 2022
3.2% rent increase since Q1 2021
RENTAL RATES The average full-service rental rate for the Atlanta market increased for the fifth consecutive quarter, settling at an all-time high of $30.12 in Q1. This was a 1.1% rise from Q4 and marks a 3.2% rise year-over-year. While this number is still a far cry from the 5-7% yearly increases Atlanta saw from 2016-2019, the gradual rise signals a bullish outlook from landlords. Rapid increases in raw materials and tenant improvement costs are also keeping rates high, as landlords are providing significantly higher concessions to attract and retain tenants.
ATLANTA MARKET RENTAL RATES Atlanta Market Rental Rates
$34.00 $32.00 $30.00 $28.00 $26.00 $24.00 $22.00 $20.00 $18.00
Class A Q1 2019
Q1 2020
Class B
Market Avg
Q1 2021
Q1 2022
Source: CoStar
INVESTMENT SALES
$231 avg transaction price/SF
OFFICE INVESTMENT SALESSales VOLUME Office Investment Volume
Atlanta saw over $4.7 billion in office investment sales in 2021, the largest figure for the market since 2015. With $1.1 billion in sales volume in Q1, 2022 is off to a similar pace, bringing the market sale price per square foot to $231. After sales volume was more than cut in half in 2020, this momentum continues to show investor confidence in Atlanta, particularly among Class A assets. Q1 was highlighted by the sales of two trophy towers: Bank of America Plaza and 3630 Peachtree. Bank of America Plaza was purchased by CP Group for $380 million ($281/sf), while 3630 Peachtree was bought by Granite Properties for $202 million ($460/sf).
$1.6B $1.4B $1.2B $1.0B $0.8B $0.6B $0.4B $0.2B $0.0B
2020 Q2
2020 Q3
2020 Q4
2021 Q1
2021 Q2
2021 Q3
2021 Q4
2022 Q1
Source: CoStar
RECENT INVESTMENT SALES Property
Submarket
Price
SF
Bank of America Plaza
Midtown
$380,000,000
1,351,586
$281
Mar 1, 2022
CP Group
725 Ponce
Midtown
$300,200,000
370,931
$809
Jul 28, 2021
Cousins Properties
999 Peachtree St
Midtown
$233,900,000
621,946
$360
Oct 22, 2021
Piedmont Office Realty Trust
3630 Peachtree
Buckhead
$202,000,000
438,910
$460
Jan 14, 2022
Granite Properties
North Fulton
$48,000,000
248,446
$193
Oct 29, 2021
Rubenstein Partners
5405 Windward Pky
$/SF
Date
Buyer
ATLANTA’S THRIVING SUBURBAN SUBMARKET Atlanta’s top performing suburban office submarket (and second-best overall, behind Midtown) over the past 12 months has been Northeast Atlanta. Highlighted by the micro-markets of Peachtree Corners and Duluth, Northeast Atlanta has seen 229,739 square feet of positive net absorption since Q1 of 2020. The submarket’s overall vacancy rate has remained steady despite the COVID-19 pandemic, having fallen 10 basis points (0.1%) to 18.3% since Q4 of 2019. The story of Northeast Atlanta and Peachtree Corners is incomplete without mentioning Intuitive Surgical. A California-based robotic surgery company, Intuitive is investing $500 million into Georgia, bringing 1,200 new jobs to the state, and plans to add 750,000 square feet of office space to their portfolio in Peachtree Corners. They have already acquired six buildings totaling 466,740 square feet, which will eventually displace tenants who already are in the Peachtree Corners area, eventually lowering the submarket’s vacancy rate even further. Lincoln Property Company Senior Associate Seabie Hickson says that Northeast Atlanta has become increasingly appealing to technology companies: “Intuitive Surgical’s presence in Peachtree Corners creates positive momentum for the submarket. It reinforces that the area is an attractive option for tech companies and should bring additional tenants to Peachtree Corners who are looking to do business with Intuitive”. Lincoln Property Company Vice President Matt Fergus adds, “Gwinnett County [where Northeast Atlanta is located] has become an ideal place for companies to establish their operations, especially in the technology industry. There is a low cost of living relative to other neighborhoods, and an educated workforce perfectly suited for these positions.” Hickson and Fergus recently closed a deal at 3100 Breckenridge in Duluth with Trenton Systems, an aerospace company who took 50,000 square feet of space. According to Fergus, Trenton Systems is a prime example of tenants investing in the market long term. The accessibility to amenities and a strong, diverse workforce are why we are seeing such positive activity.” Hickson sees more deals like this on the horizon for Northeast Atlanta, and Atlanta’s suburban product as a whole: “It might not be represented yet in absorption numbers thanks to build-out timelines and move-in delays but leasing activity has been increasing steadily in Northeast Atlanta and has begun to spill over into other suburban submarkets. Single story office has been a strong product type in these markets through the last year, but recently multi-story product has begun to catch up as well.”
lpcsoutheast.com The information contained herein has been obtained from the owner of the property or from a source deemed reliable. While Lincoln Property Company has no reason to doubt its accuracy, we do not guarantee it.
METRO ATLANTA OFFICE MARKET Q1 2022
DEVELOPMENT OUTLOOK
25
3.7
buildings
SF UNDER CONSTRUCTION
2
msf under construction
Midtown Downtown
Q1 deliveries
Two buildings delivered and two more broke ground in Metro Atlanta during Q1. The largest delivery was The Offices at Northlake Mall, a 530,000 square foot redevelopment from ATR Corinth Partners where Emory Healthcare has already taken 224,000 square feet of space. 80% of the space under construction is in urban submarkets (Midtown, Downtown, and Buckhead), with the most notable groundbreaking taking place at the Junction at Krog District. Located in the Downtown submarket and adjacent to the BeltLine Westside Trail, Junction at Krog District (667 Auburn Ave NE) is a 135,000 square foot, 3-story development from Portman Holdings.
Buckhead West Atlanta South Atlanta North Fulton Central Perimeter Northwest Northlake Northeast 0
500,000
1,000,000
1,500,000
2,000,000
Source: CoStar, LPC Research
KEY CONSTRUCTION PROJECTS Property
Submarket
Size
Owner
Expected Delivery Date
Midtown
612,947
MetLife
Q3 2022
760 Ralph McGill Blvd
Downtown
475,000
New City
Q4 2022
One Phipps Plaza
Buckhead
388,063
Simon Property Group
Q3 2022
14th & Spring
Midtown
320,089
Greenstone Properties
Q3 2022
765 Echo Street (Echo Street West)
Midtown
274,974
Lincoln Property Company
Q2 2023
Midtown Union
Westside Paper Interlock Office Phase II
West Atlanta
223,851
Third & Urban
Q3 2022
Midtown
209,174
SJC Ventures Partners
Q3 2023
OFFICE SUBMARKETS
NORTH FULTON
NORTHWEST
CENTRAL PERIMETER
NORTHEAST
BUCKHEAD
WEST ATLANTA MIDTOWN
DOWNTOWN
NORTHLAKE
SOUTH ATLANTA
lpcsoutheast.com The information contained herein has been obtained from the owner of the property or from a source deemed reliable. While Lincoln Property Company has no reason to doubt its accuracy, we do not guarantee it.
METRO ATLANTA OFFICE MARKET Q1 2022
MARKET STATISTICS
BY SUBMARKET
Total Inventory SF
Direct Vacancy Rate
Sublease Vacancy Rate
Total Vacant SF
Vac Rate Q1 ‘22
Vac Rate Q4 ‘21
Net Absorp Q1 ‘22
Net Absorp Last 12 Mos
Deliveries
Under Constr
Avg Rent (FSG)
BUCKHEAD Class A
17,961,141
22.1%
1.4%
4,220,510
23.5%
23.3%
(28,714)
(210,350)
-
553,063
$37.94
21,488,291
20.2%
1.2%
4,602,131
21.4%
21.3%
(29,696)
(181,356)
-
611,063
$37.15
Class A
14,044,607
23.1%
1.2%
3,412,556
24.3%
23.8%
(23,854)
(353,478)
60,000
644,232
$28.34
Total
21,699,701
19.1%
0.8%
4,312,086
19.9%
19.8%
28,274
(251,233)
60,000
710,550
$28.30
21,604,457
25.0%
1.3%
5,685,396
26.3%
25.4%
(191,182)
820,102
-
1,662,184
$42.31
Total DOWNTOWN
MIDTOWN Class A Total
26,041,846
22.4%
1.2%
6,139,479
23.6%
22.9%
(169,420)
802,892
69,229,838
20.7%
1.1%
15,053,696
21.7%
21.4%
(170,842)
370,303
60,000
3,015,622
$36.98
Class A
18,974,787
25.8%
2.2%
5,322,845
28.1%
27.7%
(65,314)
(294,289)
-
-
$31.89
Total
25,252,815
23.0%
1.9%
6,282,397
24.9%
24.6%
(58,270)
(218,768)
-
Urban Total
- 1,694,009
$41.61
CENTRAL PERIMETER 44,697 $30.66
NORTH FULTON Class A
13,209,944
22.7%
3.4%
3,453,730
26.1%
25.3%
(107,988)
(180,265)
-
24,764
$27.86
Total
24,085,955
19.6%
3.0%
5,435,429
22.6%
22.0%
(139,268)
(303,372)
-
115,794
$25.65
Class A
6,786,597
22.9%
1.0%
1,624,059
23.9%
22.7%
(84,057)
(37,323)
-
-
$22.45
Total
19,523,428
17.4%
0.9%
3,574,469
18.3%
17.5%
(149,029)
229,739
-
-
$20.77
NORTHEAST ATLANTA
NORTHWEST ATLANTA Class A Total
15,756,187
19.3%
2.4%
3,427,225
21.8%
21.3%
(67,840)
(13,299)
-
-
$30.15
29,573,627
17.3%
1.7%
5,631,615
19.0%
18.4%
(187,311)
(167,562)
-
43,367
$27.08
16,323,996
19.1%
0.5%
3,190,230
19.5%
16.6%
(33,650)
(57,454)
530,000
-
$23.37
10,119,653
10.5%
0.0%
1,069,626
10.6%
10.3%
(31,454)
38,894
-
165,000
$21.37
NORTHLAKE Total SOUTH ATLANTA Total WEST ATLANTA 2,144,364
25.2%
0.0%
539,897
25.2%
26.1%
19,167
(1,827)
-
Suburban Total
Total
127,065,284
18.7%
1.5%
25,723,663
20.2%
19.5%
(579,815)
(480,350)
530,000
754,009
385,151 $30.09 $26.21
Total Market
196,295,122
19.4%
1.4%
40,777,359
20.8%
20.2%
(750,657)
(110,047)
590,000
3,769,631
$30.12
Class A
114,172,336
23.4%
1.8%
28,718,109
25.2%
24.3%
(574,586)
(245,570)
590,000
3,108,094
$32.91
Class B
67,778,874
15.5%
0.9%
11,116,266
16.4%
16.1%
(187,609)
(32,173)
-
661,537
$22.07
Class C
14,343,912
6.5%
0.1%
942,984
6.6%
6.7%
11,538
167,696
-
-
$19.42
196,295,122
19.4%
1.4%
40,777,359
20.8%
20.2%
(750,657)
(110,047)
590,000
3,769,631
$30.12
BY CLASS
Total Market Source: CoStar, LPC Research
Lincoln Property Company Atlanta tracks Class A, B, and C office buildings that are 10,000 square feet or greater, and excludes owner occupied, medical, and government buildings.
Spencer Papciak Research Manager 678.498.7676 spapciak@lpc.com
Lincoln Property Company Southeast 3405 Piedmont Road, Suite 450 Atlanta, GA 30305 404 266 7600
About LPC SE: Lincoln Property Southeast is a commercial real estate firm offering a comprehensive suite of value-added services for our clients. With our substantial local presence and history in the Southeast region, we are ideally situated to provide a superior service, which comes from knowing the goals and challenges faced by our clientele: tenants, investors, lenders and owners of commercial real estate. Our people and our philosophy are the key ingredients for Lincoln’s solid track record of success. The information contained herein has been obtained from the owner of the property or from a source deemed reliable. While Lincoln Property Company has no reason to doubt its accuracy, we do not guarantee it.
lpcsoutheast.com