Despite the appreciation slowdown, eight buildings valued at over $50 million last year represented nearly half of the area's total dollar sales volume for the year.
"The handful of major transactions not only inflated dollar volume, but also boosted the regional average price per square foot to $116.20," which was a 27% increase over the previous year, according to the report.
"Some of the larger new projects in Midtown and Downtown are seeing a lot of lease activity " at occupancy rates of 50% or more, Jaska says. Some areas are not as well off, however. The North side of Atlanta's office market is sluggish, he says.
And there is some nervousness among investors and owners attributed in part to the large amount of sub-lease space in the market.
"Following the boom of the last seven years, when payroll employment grew by and estimated 590,000, the Atlanta MSA has entered a period of more sustainable growth," the report says.
Despite a high level of office construction during a time of slowing economic growth, the average vacancy rate in the Atlanta region increased by just 0.3% last year, to 11.9%, Jeska says.
The large quantity of new speculative space did have an impact on rents, which dropped 4% on average from last year.
But not all sub-markets had rent drops. Midtown, for one, had rent growths of more than 10%, attributable in part to the lease-up of several new class A buildings.
"With current vacancy of 5.3% and 3.8%, respectively, expect the Buckhead and Downtown Atlanta sub-markets to remain the tightest in the region in 2001," the report concludes.
With job growth slowing, as well as warnings of overbuilding by the Federal Deposit Insurance Corp. and local experts, many speculative office projects are predicted to be deferred.
"However, many developers, especially those with projects in the Midtown and Buckhead sub-markets, have dismissed the possibility of overbuilding, citing high demand in the form of brisk pre-leasing activity as evidence," says Marcus & Millichap.
Last year, the market had 5.7 million sf of office space come on line. Another 5.5 million sf is expected by the end of 2001, though that could drop to 5.4 million sf, the report says.
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David Wilkening
David Wilkening began his long journalism career as a police reporter for Chicago-area newspapers. He became a writer-editor for major newspapers in Chicago, Washington, Detroit and Florida. He has been a business editor, political editor and travel editor for newspapers and magazines. He tried for a while to be a political operative but did better as an adjunct college professor teaching English and journalism. He is the author of several books, both ghost-written and under his own name. He is also a widely published freelance writer who currently lives in Orlando.
