Office Market Percolating, Two Studies Find

For example, after negative absorption of 613,317 sf in first quarter 2004, class A, B and C properties aggregately posted 229,800 sf of positive net absorption in the first three months of this year, according to Richard Bowers & Co., and 1.27 million sf, according to Colliers Cauble Co.--which monitors more buildings.

"Even with the positive activity in the first quarter, brokers are expecting an even better second quarter, with many of them saying they have their hands full with leases yet to hit the market, some of them large deals," notes Scott Amoson, research director at locally based Colliers Cauble Co.

Amoson says many of the new leases will be for office space less than 25,000 sf. "Nevertheless, these transactions represent growth and expansion in the market, a healthy sign of activity," he adds.

The overall occupancy rate increased fractionally to 82.5% from 82.3% and the rental rate rose to $20.26 per sf from $20.11 per sf, according to Richard Bowers & Co. Colliers Cauble puts the average rent range in class A properties at $20.72 per sf; class B, $16.39 per sf; and class C, $14.08 per sf.

"The suburban submarkets significantly outperformed the urban corridor this quarter due to negative absorption in the Downtown (83,889 sf) and Buckhead/Lenox (37,415 sf) submarkets," says developer Richard Bowers, president, Richard Bowers & Co. "Nevertheless, urban occupancy rates remain higher at 83.6% compared to the suburban submarkets at 82%, and the urban average rental rates are more than $2.50 per sf higher at $22.92 per sf versus $18.99 per sf in the suburbs."

The suburbs also have "significantly more vacant space" at 15.3 million sf compared to the urban corridor's 6.6 million sf, Bowers adds. On the new construction front, calendar year 2005 will total only 455,000 sf of new deliveries, the lowest in the last decade, Bowers says.

"Clearly, the office market will remain a buyer's market throughout 2005," the developer projects. "However, the market is expected to change considerably by year end as absorption increases with an improving economy, current office leasing activity and potential relocations from other cities."