ATLANTA—Overall office rental rates in Atlanta increased to an all-time high of $21.73 per square foot in the third quarter of 2015. That's according to CBRE's latest market report.

"The Atlanta real estate community indicates it's a landlord market,” Bryan Heller, CBRE senior vice president of Agency/Landlord Brokerage Representation, tells GlobeSt.com. “It's not black or white, as it's always dynamic, but anyone who purchased office product since the downturn is likely to have harvested real returns and appreciation or has already sold.”

Recent year-over-year rental growth has driven rates up quicker than expected, with an increase of 4.9% from this time last year. Class A rents have attained a new record themselves, with rates at an average of $24.14 per square foot. That's an increase of 5.41% from the third quarter of 2014. All told, the Cumberland Galleria submarket had the greatest absorption this quarter at 134,568 square feet with Midtown following at 92,947 square feet.

“The typical governor on these periods where landlords have the upper hand is new supply,” Heller says. “Today, not only are the obvious land sites all but gone, including in the suburbs, the cost to deliver new construction is arguably up 50% to 75% when compared to 2000. This phenomenon has driven real rent growth over the last three years that I believe has set a new normal in our markets.”

Market conditions are expected to tighten incrementally as space options for new and existing tenants dwindle. Class B space is beginning to benefit from a lack of class A options. For the first time in several years, class B absorption surpassed class A this quarter. These class B offices are gaining more attention as a result of the lack of class A space available and rental hikes in Class A spaces.

“This is a direct result of consistent and organic absorption, which has pushed vacancy to a 14-year low,” says Dan Wagner, CBRE Southeast Research Manager. “Consistent demand and a lack of new development activity has shifted Atlanta into a landlord and owner favored market, giving them significantly more leverage over asking rents than they have experienced since the last economic growth cycle.”

Overall vacancy achieved its lowest level in 14 years, dropping to 17.8%. The low level of new office development, combined with the timing of these new deliveries, suggests vacancy will continue its decline given current market demand. Currently, Three Alliance Center in Buckhead and Riverwood 200 in Cumberland Galleria are under construction for a total of 850,000 square feet.