By comparison, second-quarter 2000 vacancies overall were 8.43%; net absorption, 1.6 million sf; and total existing square footage of 111.53 million or 6.87 million less than today's inventory.

Suburban submarket vacancies are spiraling upwards. For example, the smallest of the total 17 submarkets, the 212,000-sf I-75 corridor, has a class A vacancy level of 33% and a class B vacancy of 13.08%. But its 75,300 sf of class C product is 100% leased.

Sublease space has grown to 4.5 million sf but still not as high as in the early 1990s. However, more sublease space is on the way, the report notes. BellSouth is consolidating various major centers while the Federal Reserve is relocating and consolidating to Midtown later this year.

Total new space delivered year to date is 2.67 million sf versus 2.19 million sf a year ago.

"A continued slowdown in the office market" is how Bowers characterizes the existing inventory. "Fortunately, deliveries were also significantly reduced" to 626,792 sf.

The three central business district submarkets of Downtown, Midtown and Buckhead/Lenox, however, are holding up strongly with a 93.19% occupancy level among 37.74 million total sf. Net absorption, however, is low--Buckhead/Lenox, 20,056 sf; Downtown, 384 sf; and Midtown, a negative 7,383 sf.

That was still better than some of the 13 suburban submarkets. For instance, the booming, 12.59 million-sf GA400 North area had net absorption of 230,850 sf, the largest among the submarkets; a vacancy level of 16.69%; and 2.1 million vacant sf. The 3.38 million-sf NE Expressway-North submarket posted a 24.86% vacancy mark and net absorption of 189,589 sf.

The two largest suburban submarkets, I-285/GA-400 and I-75/I-285 controlled their vacancy numbers but couldn't improve net absorption. The 21.9 million-sf I-285/GA-400 market had occupancy of 91.46%; net absorption of 51,572 sf; and 1.87 million vacant sf. The 18.1 million-sf I-75/I-285 market shows occupancy of 92.45%; a negative net absorption of 111,788 sf; and 1.37 million vacant sf.

All of the second-quarter deliveries--eight new developments--arrived in GA400 North or Northeast Expressway North.

"We anticipate increased absorption will occur during the second half of 2001 with a continued slowdown in new deliveries," Bowers predicts. "In fact, our projection for 2002 deliveries is that new construction will rapidly decrease and deliveries will be in the two million to 2.5 million sf, at best, which is 50% or less in deliveries that will occur in 2001," the broker projects.

Average rent rates remain relatively stable at $21.64 per sf for metro Atlanta versus $21.61 per sf in the first quarter. Rents are up, however, from last year's second-quarter level of $20.99 per sf.

The I-75 corridor, smallest of the total 17 submarkets with only 212,000 sf, commands the highest average rent at $29 per sf for class A; $19.73 per sf, class B; $17.50 per sf, class C.

In the central business district, the 11 million-sf Buckhead/Lenox submarket is the most expensive, asking an average rent of $26.48 per sf. Class A in Buckhead/Lenox is $28.62 per sf; class B, $23.60 per sf; class C, $17.16 per sf.

Downtown is asking $26.08 per sf in class A; $20.72, class B; $17.12, class C. Midtown average asking rents are about the same--$26.76, class A; $19.75 per sf, class B; $17.10 per sf, class C.

Besides the $29 per sf for class A in the I-75 corridor, other high suburban average rents are in the I-285/GA-400 submarket where class A is $24.62 per sf; class B, $20.27 per sf; class C, $15.99 per sf. The I-75/I-285 submarket is asking an average $24.47 per sf for class A; $16.93 for class B; and $14.77 for class C.

Along with the flattening of rental rates, concessions are also reappearing in several submarkets for creditworthy tenants and large space users.

"Nonetheless, this condition is anticipated to be short-lived as absorption increases and fewer deliveries occur over the next 18 months," Bowers predicts.

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