Atlanta’s Office Market Rebounds, but Vacancy Looms
Below is the text from Atlanta Business Chronicle’s article Office market rebounds, but vacancy looms. In my opinion, the leasing activity in Atlanta’s Office Market is starting to improve which was seen by improved revenue of 30% in the first quarter of 2010 vs. first quarter 2009 in our Atlanta Colliers Office. However, I still believe that the Atlanta Office Market’s leasing activity will be perceived as a down year historically speaking compared to years like 2006, 2007 and 2008. So, my bet is that office rental rates will remain flat for 2010. Below is the text from Doug Sams’ (Atlanta Business Chronicle’s Commercial Real Estate Writers) above mentioned article.
The metro Atlanta office market shows some signs of ending its slide, posting its first positive absorption level since the end of 2008, according to the latest data.
With about 25 million square feet of vacant space, however, the market still has a long way to go. How much it recovers this year will depend on job growth.
Atlanta posted 39,302 square feet of positive absorption in the first quarter, the best number since 65,000 square feet was absorbed at the end of 2008, according to the brokerage firm Cushman & Wakefield of Georgia Inc.
The absorption rate measures the increase or decrease of total occupied office space during the quarter.
“In light of the losses of last year and no real employment growth, the positive rate was encouraging,” said Chris Shaner, research director with Cushman & Wakefield.
The improvement resulted from the closing of big lease transactions across metro Atlanta, including NCR Corp. (Duluth), Cox Enterprises Inc. (Sandy Springs) and Newell Rubbermaid Inc. (Sandy Springs). It also helped that all the new buildings in Buckhead and Midtown have been completed, meaning no new additional office space is being added to the market.
The Sandy Springs area, also known as Central Perimeter, posted about 280,000 square feet of positive absorption.
The Gwinnett area posted a positive 143,000 square feet.
The Atlanta office market still has a long recovery ahead, with the steepest climb for Central Perimeter, with 4.9 million square feet of available space, Buckhead (4.5 million square feet) and Midtown (4.1 million square feet).
Overall, Atlanta’s office vacancy is about 21 percent — the highest since the fourth quarter of 2004.
A true picture of the Atlanta office market is clouded by the unknown amount of “shadow space.”
Shadow space is a term describing office space that a company doesn’t occupy anymore because of downsizing. It won’t offer the space for sublease because it can’t get the rental rates it wants or because it thinks there isn’t enough demand to find a tenant.
“It’s a very difficult number to quantify,” Shaner said.
Leasing activity was up slightly to 1.8 million square feet in the first quarter, according to Cushman & Wakefield.
Many companies are still delaying real estate moves.
In 2009, about 7 million square feet of leasing transactions closed, a 24 percent drop from 2008 and a 33 percent plunge from 2007.
Sign of the times
The more than 100,000-square-foot lease that aluminum giant Novelis Inc. completed in Buckhead (reported online April 5 by Atlanta Business Chronicle) might be a sign of things to come.
It was another example of a company consolidating its real estate to save costs over the long term.
Atlanta is seen as a potential winner in that trend because it can offer lower operating costs than other parts of the United States, such as the Northeast.