230 Peach Tree

ATLANTA—The pulse of Atlanta’s office market recovery often changes depending on who you are talking to. Brokers are bullish. Landlords, not so much.

But the numbers always tell the truth. The truth is Atlanta’s office market is showing minor signs of recovery with the vacancy rate dropping .9% during the course of the past five quarters, according to Xceligent’s 1st Quarter 2014 Office Market Trends report.

Not surprisingly, class A vacancy rates have shown the most improvement dropping 1.3% since the beginning of 2013. Class B and class C vacancy rates have remained virtually unchanged the past five quarters.

“Leasing activity was showing momentum during the first quarter with absorption posting positive 330,138 square feet,” the report reveals. “A large amount, approximately 2M, of the first quarter signed leases will be occupied by tenants during the second quarter and throughout the course of the year.”

The report highlights some of the most notable deals that will occupied in the second quarter. State Farm, for example, leased 222,728 square feet in Three Ravinia and another 200,000 square feet in Ashford in the Central Perimeter submarket.

As far as new buildings, Xceligent reports there are currently two buildings under construction of significant size. One is Buckhead Atlanta, where Spanx has leased 86,000 square feet. The second is Ponce City Market, where MailChimp leased 109,000 square feet, Athena Health will occupy 90,000 square feet, and Cardlytics and Jamestown leased 75,000 square feet each.

Xceligent’s report also shows Carter’s relocated from Midtown to the Buckhead submarket occupying 222,728 at The Phipps Tower. The Pulte Group will be taking approximately 100,000 square feet and are moving from Detroit to the Buckhead submarket into the Capital City Plaza. Since the beginning of 2013 Buckhead’s vacancy has dropped 2.1%. Yet challenges remain.

“The challenge for Atlanta is there is very little contiguous space of 100,000 square feet or more,” Xceligent concludes. “This amount of continuous space is lacking in almost every submarket. The majority of the submarkets rental rates remain stable. With the lack of large contiguous space the market expects rates to increase in Buckhead and the Perimeter submarkets and the two could begin to turn to a landlords market, specifically in class A buildings meaning less free rent and TI.”

To download the full first quarter 2014 Office Market Trend report for Atlanta, click here.