ATLANTA—”Took off running.” That’s the phrase Cushman & Wakefield used to describe Atlanta’s office market in the first quarter of 2014.
The firm’s latest research reports vacancy dripped 19%. At the same time, increased occupancy gains momentum translated to a 20 basis point decrease in vacancy from the end of 2013 and a 120 year-over-year basis point decrease.
In fact, according to C&W Research, absorption for the first quarter of 2014 totaled 816,305 square feet. That’s the strongest quarterly absorption the Atlanta market has seen since the third quarter of 2012—and almost double the absorption the market posted during the last quarter of 2013.
“Atlanta’s office market got off to a great start in 2014 as the pace of occupancy gains picked up,” says Will Porter, a leasing manager in CushWake’s Atlanta Corporate Occupier and Investor Services practice. “We are finally seeing markets that have been slower to recover, such as Midtown and Downtown, post consistent positive net absorption. Buckhead and Central Perimeter have led Atlanta’s recovery and continued to tighten during the first quarter.”
The market’s largest lease deals during the first quarter included Fiserv, which signed a 380,300-square-foot lease at 12525 Cingular Way in the Georgia 400 submarket. Another notable signing was CH2M Hill’s 97,000-square-foot lease at 6600 Peachtree Dunwoody Road in the Central Perimeter submarket.
“We are even beginning to see rent growth in these high-demand markets, particularly in class A buildings,” Porter says. “Atlanta’s office market should gain momentum going forward in 2014 as tenant activity remains healthy and vacancies continue to decline.”
Overall average asking rents began to increase, averaging $20.94 per square foot as of the end of the first quarter. That’s up 10 basis points from $20.91 one year ago. Notably, overall class A asking rents have increased 1.6% year-over-year to an average of $24.07 per square foot as Atlanta’s class A market continued to tighten.
Development remained, as CushWake describes it, “tempered.” Construction for Atlanta’s three current office projects—Buckhead Atlanta, Ponce City Market in Midtown and Avalon in Alpharetta—are all well under way.
Buckhead Atlanta will initially include 100,000 square feet of office space, which is expected to deliver during the second quarter of 2014. The Ponce City Market mixed-use development in Midtown, will include 450,000 square feet of office space, is expected to deliver during the third quarter of 2014. Also expected to deliver during the third quarter, the Avalon project in Alpharetta will include 111,000 square feet of spec office space.