Regions Southeast | Atlanta
Jan 17, 2008
By: Amanda Marsh, Associate Editor
The Atlanta market is making positive strides towards stability as tenant demand continues to have a positive effect on overall market conditions, a Jones Lang LaSalle Inc. report has found.
Overall absorption for the fourth quarter was approximately 220,000 square feet, for a total net absorption of 1.9 million square feet. Vacancy rates hovered near 19 percent, which was relatively unchanged compared to fourth quarter 2006. While the overall activity is slightly off-pace from historical experience, the firm expects stable leasing activity throughout this year, noted David Demarest, managing director of Jones Lang LaSalle's tenant representation group (pictured).
Construction continues at a steady pace, and 2 million square feet delivered last year. Although a health level of new construction exists, there is still some concern with deliveries over the next few years, "especially in Buckhead," Demarest told CPN. "There's upwards of 2 million square feet under construction, and there's isn't the demand, historically, in absorption."
However, rental rates continue to rise; the downtown and suburban markets together averaged $21.20 per square foot in the fourth quarter, up nearly four percent from the third quarter's $20.39 per square foot and a significant rise from year-end 2006's $19.96 per square foot, the reported noted. The CBD saw average rental rates of $22.00 per square foot, an increase of $1.74 from the average recorded between July and September.
Although the CBD experienced overall positive net absorption of 745,000 square feet for the year, absorption tapered in the downtown market from the third to fourth quarter. Despite the slight slowdown, healthy demand remains, especially as Downtown's Georgia Aquarium and The New World of Cocoa-Cola breathe new life into the area, the report said. The firm expects that vacancy rates will continue to fall and rental rates will rise, in response.
Recent significant leases in the CBD included: the Georgia Department of Transportation's 267,850-square-foot lease in Downtown's Georgia Center and Invesco's 178,000-square-foot lease in Midtown's Two Peachtree Pointe. And with the potential of more than one million square feet of new office product in Midtown, there will be pressure on landlords to offer aggressive lease packages to secure tenants, the firm said.
In the suburbs, vacancy rates decreased slightly between October and December, from 17.79 percent to 17.84 percent, Jones Lang LaSalle found. The Central Perimeter submarket's vacancy rates rose slightly and experienced a negative 210,000 square feet in absorption for the fourth quarter, but the other three quarters were strong and overall net absorption is expected to be the second highest of all Atlanta submarkets at a positive 554,000 square feet. One of the fourth quarter's largest leases was Travelers Indemnity Co., which signed for 177,715 square feet of space in the North Fulton submarket.
Despite the market's strong fundamentals, Demarest noted that the market still needs to watch economic conditions and the ripple effects from the credit crunch and subprime meltdown. "Atlanta is dependant on a service economy," he said. "We'll have to work our way through this, but once (the U.S.) gets a handle on the situation, we should be okay."
By: Amanda Marsh, Associate Editor
The Atlanta market is making positive strides towards stability as tenant demand continues to have a positive effect on overall market conditions, a Jones Lang LaSalle Inc. report has found. Overall absorption for the fourth quarter was approximately 220,000 square feet, for a total net absorption of 1.9 million square feet. Vacancy rates hovered near 19 percent, which was relatively unchanged compared to fourth quarter 2006. While the overall activity is slightly off-pace from historical experience, the firm expects stable leasing activity throughout this year, noted David Demarest, managing director of Jones Lang LaSalle's tenant representation group (pictured).
Construction continues at a steady pace, and 2 million square feet delivered last year. Although a health level of new construction exists, there is still some concern with deliveries over the next few years, "especially in Buckhead," Demarest told CPN. "There's upwards of 2 million square feet under construction, and there's isn't the demand, historically, in absorption."
However, rental rates continue to rise; the downtown and suburban markets together averaged $21.20 per square foot in the fourth quarter, up nearly four percent from the third quarter's $20.39 per square foot and a significant rise from year-end 2006's $19.96 per square foot, the reported noted. The CBD saw average rental rates of $22.00 per square foot, an increase of $1.74 from the average recorded between July and September.
Although the CBD experienced overall positive net absorption of 745,000 square feet for the year, absorption tapered in the downtown market from the third to fourth quarter. Despite the slight slowdown, healthy demand remains, especially as Downtown's Georgia Aquarium and The New World of Cocoa-Cola breathe new life into the area, the report said. The firm expects that vacancy rates will continue to fall and rental rates will rise, in response.
Recent significant leases in the CBD included: the Georgia Department of Transportation's 267,850-square-foot lease in Downtown's Georgia Center and Invesco's 178,000-square-foot lease in Midtown's Two Peachtree Pointe. And with the potential of more than one million square feet of new office product in Midtown, there will be pressure on landlords to offer aggressive lease packages to secure tenants, the firm said.
In the suburbs, vacancy rates decreased slightly between October and December, from 17.79 percent to 17.84 percent, Jones Lang LaSalle found. The Central Perimeter submarket's vacancy rates rose slightly and experienced a negative 210,000 square feet in absorption for the fourth quarter, but the other three quarters were strong and overall net absorption is expected to be the second highest of all Atlanta submarkets at a positive 554,000 square feet. One of the fourth quarter's largest leases was Travelers Indemnity Co., which signed for 177,715 square feet of space in the North Fulton submarket.
Despite the market's strong fundamentals, Demarest noted that the market still needs to watch economic conditions and the ripple effects from the credit crunch and subprime meltdown. "Atlanta is dependant on a service economy," he said. "We'll have to work our way through this, but once (the U.S.) gets a handle on the situation, we should be okay."
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