Office Market Heads for Robust 2005

"We have had very few deliveries for 2004, with only three buildings delivered totaling 640,000 sf, the largest being the SouthTrust building at Atlanta Station with 500,000 sf," notes company president Richard Bowers. "Even lower deliveries are projected for 2005 at only 320,000 sf." That scenario means tenants seeking space will have to go to existing product, the report suggests.

"In addition to project increased absorption and little new development, several older, less dense office parks have been torn down for retail and residential use, particularly in the Perimeter Center area, " Bowers says. "Several additional office developments are projected to be removed from the office market in the not-too-distant future in that same submarket."

The leading submarkets, based on net absorption, are Midtown at 541,151 sf, followed by I-285/GA 400 at 477,767 sf and I-75/I-285 at 285,680 sf. "Although the office market appears to have bottomed and is turning more favorable, eight of the 16 submarkets still show negative absorption, including two of our six largest--Downtown and Buckhead," Bowers says.

Downtown had negative absorption of 3,524 sf in the last period monitored by Richard Bowers & Co. The Buckhead/Lenox submarket showed negative absorption of 142,994 sf. In the suburbs, the negative areas are Airport/South, 27,540 sf; Decatur, 74,154 sf; I-20W/Greenbriar, 14,757 sf; I-285/ Stone Mountain, 5,537 sf; NE Expressway-North, 1,226 sf; NE Expressway-South, 56,412 sf; and Peachtree Corners, 115,308 sf.

"The urban corridor is still significantly higher in occupancy rates at 83.6% and average rental rates at $22.81 per sf, compared to the suburbs at 81.4% occupancy and $18.89 per-sf [rent]," Bowers points out. "Nevertheless, the suburban office market, year-to-date, is outperforming the urban market by far with 649,609 sf of positive absorption versus 114,641 sf of negative absorption in the urban corridor."