Metro Atlanta Office
Q3 2022
Deliveries Overshadow Positive Q3 for Atlanta Office Market The Atlanta office market saw its fourth positive quarter in the past five with positive absorption of 425,560 square feet across all property classes in Q3 of 2022. The market’s overall vacancy rate rose 60 basis points (0.6%) despite the positive absorption thanks to over 2 million square feet in deliveries. 8 buildings totaling 2,014,967 square feet delivered in Q3, the largest single-quarter of new supply into the Atlanta office market in over 20 years. These new buildings are mostly class A towers in Atlanta’s urban submarkets. The new supply is 50% leased, but most tenant move-ins won’t take place until at least Q4 of 2022 or early 2023. Midtown was once again Atlanta’s top performing submarket in Q3 with positive absorption of 175,532 square feet. This was driven by Cisco occupying 113,698 square feet at Coda. Elsewhere, Central Perimeter experienced its second consecutive positive quarter behind Hapag-Lloyd moving into 128,109 square feet at Three Ravinia.
Year-to-date, Atlanta has seen a 0.6% rise in vacancy rate, and positive absorption of over 1 million square feet.
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
20.3%
452,560
vacancy rate
net absorp Q3
2,689,615
$30.63
sf under constr
asking rent
1,090,388 net absorp year-to-date
2.9M 3.0% 3.5% ATL total nonfarm employment
ATL unemployment rate
US unemployment rate
Source: U.S. Bureau of Labor Statistics; LPC Research
AbsorptionAND and Vacancy Rate RATE ABSORPTION VACANCY
22% 20%
Q1 2020
Q3 2020
Q1 2021
Q3 2021
Q1 2022
Q3 2022
18% 16% 14% 12%
Absorption
Vacancy Rate
Source: CoStar; LPC Research
LEASING ACTIVITY There were 2.7 million square feet worth of signed leases in Q3, led by multiple large renewals across both urban and suburban submarkets. Nelson Mullins (103,156 sf renewal at 201 17th St in Midtown) and Travelers (92,244 sf renewal at 1000 Windward Concourse in North Fulton) led the way in this regard. Midtown continued its positive momentum, with over 650,000 square feet of signed leases in Q3. Midtown has averaged 617,000 square feet of signed leases per quarter since Q3 of 2021 after averaging just 193,000 square feet in the four quarters prior. TOP LEASES Q3 2022 Tenant Nelson Mullins Travelers ADP
Property
Submarket
Landlord
SF
Lease Type
201 17th St
Midtown
KBS
103,156
Renewal
1000 Windward Concourse
North Fulton
B Group Capital Management
92,244
Renewal
5995 Windward Pky
North Fulton
Grubb Properties
80,793
Sublease
Zurich North America
1001 Perimeter Summit
Central Perimeter
State Street Corporation
61,706
Renewal
Cleveland Electric Co
Northcreek 100
Northwest Atlanta
GEM Realty Capital
51,042
New Lease
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 Q3 2022
2.7% rent increase since Q3 2021
RENTAL RATES The average full-service rental rate for the Atlanta office market finished Q3 of 2022 at $30.63, a 1.5% rise since Q2, and a 2.7% increase over the past year. This is still a far cry from the 5-7% yearly increases that Atlanta saw from 2016-2019. While rising rental rates are generally a positive market indicator, recently landlords have had to give more concessions to attract tenants. Thanks to global supply chain problems and continued cost increases for raw materials making space build-outs longer and more expensive, landlords are offering higher tenant improvement allowances.
Atlanta Market Rental Rates ATLANTA MARKET RENTAL RATES
$35.00 $34.00 $33.00 $32.00 $31.00 $30.00 $29.00 $28.00 $27.00 $26.00
Q3 2019
Class A Q3 2021
Q3 2020
Market Avg
Q3 2022
Source: CoStar
INVESTMENT SALES
$225 avg market sale price/SF
Office Investment Volume OFFICE INVESTMENT SALESSales VOLUME
Atlanta reached a seven-year high in total office investment sales in 2021 at $4.9 billion and has seen over $3.8 billion in sales thus far in 2022. Uncertainty in the debt markets though has cooled off investment sales activity, a trend expected to continue through the remainder of 2022. While some buildings have still traded in the past few months, such as 1180 Peachtree ($472 million, $683/sf) and Atlantic Yards ($385 million, $735/sf), most deals are in a holding pattern while lenders and buyers take stock of the rapidly changing market conditions. Due to these trophy assets trading, the average price per square foot across the market continues to rise, currently at $225/sf, up 5.1% from a year ago.
$1.8B $1.6B $1.4B $1.2B $1.0B $0.8B $0.6B $0.4B $0.2B $0.0B
2020 Q4
2021 Q1
2021 Q2
2021 Q3
2021 Q4
2022 Q1
2022 Q2
2022 Q3
Source: CoStar
RECENT INVESTMENT SALES Property
Submarket
Price
SF
$/SF
Date
Buyer
1180 Peachtree
Midtown
$472,000,000
691,000
$683
Aug 10, 2022
Piedmont Office Realty Trust
Atlantic Yards
Midtown
$385,000,000
523,511
$735
Jul 19, 2022
KKR
Bank of America Plaza
Midtown
$380,000,000
1,351,586
$281
Mar 1, 2022
CP Group
The Pinnacle
Buckhead
$220,000,000
430,124
$511
May 18, 2022
STRS Ohio
The Towers at Wildwood
Northwest
$109,500,000
719,030
$152
Sep 23, 2022
The Simpson Organization
CENTRAL PERIMETER IS WORKING ON A COMEBACK Central Perimeter saw positive absorption of 87,436 square feet in Q3 of 2022. This was a notable figure as it was Central Perimeter’s third positive absorption quarter in the past four – the same number of positive quarters as Q3 2017 through Q3 2021. While Central Perimeter has by no means been the hottest submarket in Atlanta (23.0% vacancy rate, high sublease availabilities), this still represents momentum in a positive direction – something that Central Perimeter has lacked.
Lincoln Property Company Senior Vice President Hunter Henritze says that some activity is returning to Central Perimeter despite being put behind the eight ball by State Farm’s headquarters consolidation: “State Farm spent years taking up over a million square feet of space across the Central Perimeter submarket, just to consolidate that space into a built-to-suit headquarters, causing a massive jump in the submarket’s vacancy in the process. Central Perimeter has spent several years fighting this from an absorption standpoint and it is just now starting to see some gains in that department.”
Owners in Central Perimeter have become creative to attract tenants says Henritze, “You have seen success with whole building renovations like Campus 244, as well as spec suites in other buildings.” Spec suites are a great way to combat sublease space that is more move-in ready, which there is plenty of in Central Perimeter: the submarket has the highest percent of inventory available for sublease of any major Atlanta submarket at 5.5%. “There’s a long way to go” says Henritze, “but the future is looking up for Central Perimeter.”
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 Q3 2022
DEVELOPMENT OUTLOOK
19
2.7
buildings
SF UNDER CONSTRUCTION
8
msf under construction
Midtown Downtown
Q3 deliveries
Eight buildings totaling over 2 million square feet delivered in Q3 of 2022, the largest figure for a single quarter in Atlanta in over 20 years. Notable buildings that delivered include Midtown Union and 14th & Spring in Midtown, Fourth Ward in Downtown, and One Phipps Plaza in Buckhead. This new product to the Atlanta market is 50% leased but will not see most tenants move in and occupy their new space until Q4 at the earliest. Spring Quarter at 1020 Spring St, a 538,126 square foot development from Portman Holdings, is the newest Midtown trophy tower to break ground, with an expected delivery date of Q3 2025.
West Atlanta Buckhead South Atlanta North Fulton Northwest Central Perimeter Northeast Northlake 0
500,000
1,000,000
1,500,000 Source: CoStar, LPC Research
KEY CONSTRUCTION PROJECTS Property Spring Quarter Science Square Labs
Submarket
Size
Owner
Expected Delivery Date
Midtown
538,126
Portman Holdings
Q3 2025
Downtown
364,871
Georgia Tech
Q1 2024
Midtown
274,974
Lincoln Property Company
Q2 2023
West Atlanta
223,851
Third & Urban
Q4 2022
Interlock Office Phase II
Midtown
209,174
SJC Ventures
Q3 2023
Junction at Krog District
Downtown
136,000
Portman Holdings
Q2 2023
Garden Hills Office Building
Buckhead
129,751
Brand Properties
Q3 2023
765 Echo (Echo Street West) Westside Paper
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 Q3 2022
MARKET STATISTICS Total Inventory SF
Direct Vacancy Rate
Class A
18,028,482
Total
21,807,406
Class A Total
BY SUBMARKET
Sublease Vacancy Rate
Total Vacant SF
Vac Rate Q3 ‘22
Vac Rate Q2 ‘22
Net Absorp Q3 ‘22
Net Absorp YTD
24.0%
1.6%
4,620,399
25.6%
24.1%
(5,040)
(121,185)
365,263
129,751
$38.05
22.2%
1.4%
5,151,265
23.6%
22.0%
(61,903)
(220,991)
365,263
187,751
$36.97
14,194,884
25.1%
0.6%
3,654,040
25.7%
23.6%
96,264
80,478
585,350
619,871
$31.47
21,910,789
20.7%
0.4%
4,624,871
21.1%
19.5%
99,712
104,382
618,668
652,871
$31.14
22,215,732
23.5%
1.1%
5,479,282
24.7%
21.8%
196,762
749,628
1,178,036
1,168,428
$42.47
1,218,036
Deliveries YTD
Under Constr
Avg Rent (FSG)
BUCKHEAD
DOWNTOWN
MIDTOWN Class A Total
26,447,609
21.3%
1.1%
5,906,183
22.3%
19.6%
175,532
838,572
1,168,428
$41.80
70,165,804
21.4%
1.0%
15,682,319
22.4%
20.3%
213,341
721,963 2,201,967 2,009,050
$37.50
19,511,143
23.5%
2.0%
4,981,169
25.5%
26.3%
143,299
342,162
-
35,656
$32.18
25,909,176
21.3%
1.8%
5,963,109
23.0%
23.4%
87,436
367,728
-
35,656
$31.01
Class A
12,885,621
23.7%
2.8%
3,421,149
26.6%
26.3%
(29,411)
(164,161)
-
22,070
$28.07
Total
24,324,183
19.7%
3.0%
5,524,011
22.7%
22.7%
5,545
(241,959)
-
89,571
$25.97
6,816,741
20.8%
0.7%
1,467,239
21.5%
21.8%
19,130
48,100
-
35,580
$22.83
18,933,327
15.0%
0.9%
3,007,315
15.9%
15.9%
5,117
52,150
-
35,580
$21.22
Urban Total CENTRAL PERIMETER Class A Total NORTH FULTON
NORTHEAST ATLANTA Class A Total NORTHWEST ATLANTA Class A
15,705,356
19.1%
1.1%
3,172,262
20.2%
20.4%
30,224
141,402
-
-
$29.99
Total
29,326,927
16.8%
1.0%
5,235,276
17.9%
18.1%
77,655
108,282
-
43,367
$27.12
15,841,882
19.4%
0.2%
3,107,490
19.6%
19.9%
42,031
10,224
530,000
-
$23.30
10,099,220
8.3%
0.1%
851,950
8.4%
8.6%
16,916
49,046
54,000
125,000
$21.86
NORTHLAKE Total SOUTH ATLANTA Total WEST ATLANTA 2,254,134
28.9%
0.0%
652,269
28.9%
29.1%
4,519
22,954
161,300
Suburban Total
Total
126,688,849
17.9%
1.3%
24,341,420
19.2%
19.4%
239,219
368,425
745,300
680,565
351,392 $30.80 $26.42
Total Market
196,854,653
19.1%
1.2%
40,023,739
20.3%
19.7%
452,560
1,090,388 2,947,267
2,689,615
$30.63
Class A
115,108,457
23.3%
1.4%
28,447,020
24.7%
23.8%
434,978
1,037,002 2,658,649
2,235,207
$33.43
Class B
67,360,628
14.7%
1.1%
10,627,058
15.8%
15.8%
51,423
76,257
288,618
454,408
$22.64
Class C
14,385,568
6.5%
0.1%
949,661
6.6%
6.4%
(33,841)
(22,871)
-
-
$19.68
196,854,653
19.1%
1.2%
40,023,739
20.3%
19.7%
452,560
1,090,388 2,947,267
2,689,615
$30.63
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.
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