Office Market Shows Fifth Straight Quarter of Positive Absorption

Leading the improvement were the 21.9-million-sf Interstate 285/GA 400 submarket with 116,000 sf of net absorption, followed by the 12.3-million-sf Midtown area with 110,000 sf and the 7.9-million-sf Peachtree Corners with 47,000 sf. Vacancy is at 17.2% compared to 18.4% in second quarter 2004.

The average quoted rental rate is $20.33 per sf versus $20.24 per sf a year ago at this time. Urban corridor rates increased slightly, moving from $22.92 per sf to $22.98 per sf. Suburban rates climbed to $19.08 per sf from $18.99 per sf.

The biggest eye-opener, however, is in the space delivered year to date compared with 2004. New product totals 56,440 sf compared to 514,314 sf in second quarter last year.

Total available sf has declined by more than 400,000 sf, from 23.1 million sf to 21.6 million sf. "In addition to the positive absorption, 256,000 sf was taken off the office market for conversion to residential use," Bowers notes. Among the properties were 1100 Ashwood with 125,500 sf, the Peach with 68,300 sf and several smaller buildings in the Perimeter Center submarket as part of a larger residential land assemblage.

"As has been the case for the last several quarters, the suburban submarkets outperformed the urban corridor, with 526,188 sf of positive absorption, compared to 92,783 sf of negative absorption in the urban corridor," Bowers says. Still, the broker notes, the urban corridor maintains a higher occupancy at 83.7% compared to 82.4% in the suburbs. Additionally, average rental rates along the urban corridor remain "significantly higher" at an average $22.98 per sf versus an average $19.08 per sf in the suburbs, Bowers says.

The labor picture in the metro area remains uncertain. "Unfortunately, few major corporations are hiring aggressively, and most of Atlanta's employment grow has come from small to medium-sized entrepreneurial firms," Bowers points out. Overall, however, the broker is positive on the market. "With an improving economy and only 500,000 sf of deliveries scheduled over the next 12 months, the office market should continue to rebound," Bowers says. He expects to see significant improvement in rental rates and occupancy for the remainder of 2005 through both positive absorption and the redevelopment of older, less dense office development projects into alternative uses.