ATLANTA—The battle for leverage in tenant-landlord leasing negotiations ended in the first half of 2014. So says CBRE. The firm reported it in its OccupierView report over a year ago.
"After years of heightened vacancy, suppressed rental rates and liberal concession packages, accelerating leasing activity led to fewer available large blocks of CBD space and tightening market fundamentals," Dan Wagner, CBRE Southeast research manager, tells GlobeSt.com. "That provided support for increased asking rents in outperforming submarkets."
So what about to day? Fast-forward a year and where is the market?
"Market conditions in Buckhead, Central Perimeter and Midtown are forcing occupiers and real estate professionals to realign their rental rate expectations," Wagner said. "Average quoted rents contained in landlord leasing proposals from these submarkets have risen by an average of 44% since 2011, with Midtown leading the way at 49%. While executed leases ultimately deviate from initial proposal terms, the reality is that tenants are facing significant occupancy cost increases."
As Wagner sees it, Atlanta's historically robust office development cycles have resulted in an occupier base that is not accustomed to substantial rent growth. But, he added, tenants are now realizing the days of seemingly limitless space and pricing options are behind us.
"Despite the changes, anecdotal evidence suggests tenants have thus far been willing to pay more in order to remain in place, a positive sign for owners and investors," Wagner said. "Looking ahead, a severe lack of new development activity and dwindling vacancy suggests fundamentals will continue to tighten, providing room for further rent growth."
Atlanta's office market recently celebrated a first. Click here to read more.
Continue Reading for Free
Register and gain access to:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
