2004 Office Leasing Flow Best Since 2001

Total net absorption in 2004 was 781,222 sf versus a negative 1.7 million sf in 2003. Fourth quarter 2004 absorption was also a positive 246,254 sf. The best leasing performances were in Midtown with 547,849 sf of positive absorption. Next was the I-285/GA-400 submarket at 532,258 sf, followed by the I-75/I-285 submarket at 255,188 sf.

"Although positive absorption has not improved to the robust levels of the late 1990s, vacant square footage has been reduced from a high of 23,116,322 sf in the second quarter of 2004 to 22,213,041 sf at year-end 2004," says Richard Bowers, president of Richard Bowers & Co.

The average rental rate moved down slightly from $20.15 per sf in the third quarter to $20.11 per sf at year-end 2004, "continuing the trend from year-end 2003 when the average rental rate was $20.36 per sf, a 25-cent-per-sf decrease over the past year," Bowers says.

Although the urban corridor is still "significantly higher" in occupancy at 83.8% and the average rent rate of $22.66 per sf compared to the suburbs at 81.7% occupancy and $18.90 per sf, "the suburbs outperformed the urban markets by far in 2004," Bowers says.

The suburbs recorded 822,774 sf of positive absorption compared to 41,552 sf of negative absorption in the urban submarkets. "The negative urban absorption was largely attributable to several large users reducing space or relocating from the central business district," according to the Bowers report.

On space availability, the leading submarkets haven't changed since 2003. The I-285/GA-400 submarket has nearly 4.3 million sf, followed by the I-75/I-285 submarket at slightly more than 3.1 million sf and the GA-400 North submarket at three million sf.

Only four deliveries are scheduled for 2005. New product includes two buildings in the suburbs at Gwinnett County's Business Park at Sugarloaf Six, totaling 140,000 sf, and two urban buildings--Two Buckhead Plaza containing 160,000 sf and 30 Allen Plaza with 260,000 sf. The total 560,000 sf for 2005 is about the same as the 2004 delivery count.

"With an improving economy, several potential relocations to Atlanta, and healthy job growth, we expect 2005 to be a significantly improved year with as much as two million sf of positive absorption--a number still far below that of several years in the late 1990s and early 2000s," says Bowers.