ATLANTA—The momentum in Atlanta's office market is building. After years of steady recovery, the office vacancy sits at 17.8%. All told, the gains led to a 140 basis point decrease in vacancy from 2013 year-end, according to Cushman & Wakefield.

Atlanta's office market posted 9.1 million square feet of new leasing activity in 2014. That represents a 3.5% increase from 2013 and marks the strongest annual leasing activity the market has seen since 2008.

“In 2014, clear signs of an impending improvement have been appearing around the entire region,” says Ken Ashley, an executive director with CushWake's Tenant Advisory Group. “Property sales prices are up, landlords are reducing concessions and even raising lease rates, and investors are injecting new equity into property deals. Just as importantly, building owners have largely dealt with debt that turned bad in the wake of the financial crisis.”

Consistently healthy absorption is the Atlanta office market's storyline in the fourth quarter of 2013. CushWake reports 533,000 square feet of office space leased in the period. As it stands, Atlanta has seen 12 consecutive quarters of net occupancy gains, which continue to drive Atlanta's office vacancy downward toward pre-recession levels. Annual absorption for 2014 totaled 2.7 million square feet, a 77% increase compared to the overall absorption posted in 2013.

The market's largest new lease deals in 2014 included Fiserv, which signed a 376,000-square-foot lease at Cobalt Center in the Georgia 400 submarket. Halyard Health leased 176,000 square feet of office space at 5405 Windward Parkway, also in the Georgia 400 submarket. WorldPay inked a 129,000-square-foot lease at 201 17th Street in the Midtown submarket.

At an average of $21.38 per square foot as of the end of 2014, overall average asking rents increased 2.7% from 2013 year-end, marking the strongest annual rent growth the market has seen in six years. Notably, overall class A asking office space rents have also increased 3.5% over the same time period to an average of $24.66 per square foot as Atlanta's class A market continued to tighten, particularly in submarkets like Buckhead and Central Perimeter.

Although Atlanta's construction pipeline for new office space remains conservative, several projects are well under way, including Buckhead Atlanta and Three Alliance, Tishman Speyer's much anticipated 500,000-square-foot class A office tower in the heart of Buckhead. Notable project deliveries in 2014 included Ponce City Market in Midtown and Avalon in Alpharetta.

Investment sales activity in the Atlanta market picked up significantly during the second half of 2014 following tempered activity during the first half of the year. Sales activity during the fourth quarter totaled 5.5 million square feet, marking the strongest quarterly investment sales activity for the year. Annual investment sales in 2014 totaled 14.4 million square feet.

However, activity lagged behind the 2013 pace by 6.8%. Key sale transactions for the year included the sale of Northpark Town Center, which sold to Cousins Properties for $348 million in October, and the sale of 3630 Peachtree, which sold to Heitman for $170 million in June. Atlanta's investment sales pipeline is strengthening and we expect to see a significant pick-up in transactions in 2015.

At an average of $21.38 per square foot as of the end of 2014, overall average asking rents increased 2.7% from 2013 year-end, marking the strongest annual rent growth the market has seen in six years. Notably, overall class A asking office space rents have also increased 3.5% over the same time period to an average of $24.66 per square foot as Atlanta's class A market continued to tighten, particularly in submarkets like Buckhead and Central Perimeter.

Although Atlanta's construction pipeline for new office space remains conservative, several projects are well under way, including Buckhead Atlanta and Three Alliance, Tishman Speyer's much anticipated 500,000-square-foot class A office tower in the heart of Buckhead. Notable project deliveries in 2014 included Ponce City Market in Midtown and Avalon in Alpharetta.

Investment sales activity in the Atlanta market picked up significantly during the second half of 2014 following tempered activity during the first half of the year. Sales activity during the fourth quarter totaled 5.5 million square feet, marking the strongest quarterly investment sales activity for the year. Annual investment sales in 2014 totaled 14.4 million square feet.

However, activity lagged behind the 2013 pace by 6.8%. Key sale transactions for the year included the sale of Northpark Town Center, which sold to Cousins Properties for $348 million in October, and the sale of 3630 Peachtree, which sold to Heitman for $170 million in June. Atlanta's investment sales pipeline is strengthening and we expect to see a significant pick-up in transactions in 2015.