Hard-Hit Owners Offer Brokers $50 to Show Space

"Owners are sometimes taking 80 cents on the dollar and offering brokers $50 just to show their space," he says.

The softer office market is mainly in class B and class C buildings, and probably less true for class A, says Roger Tutterow, professor of economics at Kennesaw State University.

"The class A side of the market is probably less likely to be overbuilt, particularly in the northwestern area of the city," he tells Globest.com.

Higher than normal tenant improvements are becoming more common, Poulos says, but rent reductions have yet to become prevalent. "We may still be a bit away from that," he says.

But, he adds, the most likely area for concessions may be in the northeast market where about one quarter of the highest-priced office space is located.

The soft market is most apparent in sublease space. "A lot of the dot.com space has come back into the market," Poulos says. Up to 2.5 million sf is available for sublease, according to various estimates.

Tutterow points out that developers generally were not aware that this subleased space would be available when they began projects a year or more ago.

Atlanta's office market in the first quarter had a net gain of 367,000 sf of occupied space, according to various studies, which represented a drop of 80% from the previous quarter.

One of the most active office areas recently has been Cobb County where two major projects under construction are the Galleria 600, an 18-story, 432,000-sf structure at the Galleria, and One Overton Park, a 15-story, 380,000-sf building at I-75 and Cumberland Blvd.

Other brokers also say that new buildings combined with increasing sublease buildings available in the market will combine to bring even more rent reductions if the market continues at its present pace.

Those concessions could be particularly significant in the Midtown market, which was recently included on Merrill Lynch's list of the 10 office markets nationwide that "will be especially hard hit by the coming (real estate) correction."

But some owners of trophy assets such as the Proscenium say rates are remaining steady. That 23-story building continues to draw $26.50 per sf to $28.50 per sf rates, according to leasing agent Amy Smith Cate.