Suburbs Dominate Office Market

"Lease expirations, tenant move outs and the lack of activity continue to daunt the central business district," notes Scott Amoson, director of research at locally based Colliers Cauble Co. which makes quarterly reports on all market components. "The suburbs proved to be the most attractive areas for office space in Atlanta, accounting for more than 70% of the absorption for the year."p>In the race for tenants between Downtown and Midtown, the Colliers Cauble numbers show it was no race at all. Midtown dominated the leasing scene with positive class A net absorption of 922,685 sf. Downtown posted negative net absorption of 206,709 sf. In all classes, Midtown absorbed 957,518 sf, Downtown had a total negative absorption of 500,553 sf.

Overall, however, the vacancy level within metro's 163-million-sf office inventory is down 2% from a year ago to 19.7%. Downtown class A vacancy at 23 buildings is 18.2% on 13.11 million sf of rentable space. Midtown's vacancy at 24 buildings covering 9.11 million sf of class A space is 20.2%. "Concerning the major submarkets, vacancy rates over the year decreased for all but Downtown," Amoson says.

"For the first time in four years, Atlanta's office space absorption was in the millions of square feet," the researcher notes. "Not since 2001 has the vacancy rate been below 20%." But Amoson doesn't expect the euphoria to last.

"Although still likely to show positive leasing activity, 2005 is not expected to reach the same levels of absorption as 2004," he says. "Lack of job growth to fuel demand is the main reason for this." On this specific issue, Amoson's outlook differs from that of John M. Leonard, vice president and manager of Marcus & Millichap's Atlanta office. On the retail and apartment scene particularly, Leonard projects new jobs will drive those two markets this year, as Globest.com previously reported.