Midtown's Vacancy Tops Major Office Submarkets

"Move-ins outpaced move-outs by 1.07 million sf in what is historically a slower quarter due to the summer season," notes Scott Amoson, Colliers Cauble's research director. Midtown's 15.5-million-sf inventory led the major submarkets with a 13.8% vacancy, followed by the 14.2-million-sf Buckhead market at 15.7% and the 20.5-million-sf Downtown market with 20.6%. The overall vacancy of the 1,925 monitored buildings is 17.3%, a 0.7% decrease from mid-year 2005 and a 2.3% decrease from this time last year.

Midtown also led in overall net absorption with 719,415 sf compared to Downtown's 208,895 sf and Buckhead's negative absorption of 112,015 sf. "Absorption has been positive and healthy over the year due to lease expansions and a handful of new deals," Amoson says.

Among the larger corporate expansions in the third quarter were Piedmont Healthcare growing to 96,949 sf at Paces West in northwest Atlanta; Med Assets expanding to 57,000 sf at North Point Center East in North Fulton; and Novellis Inc. expanding its headquarters space by 15,910 sf at the Lenox Building in Buckhead.

Large third-quarter leasing deals included BlueLinx renewing for 250,000 sf at Wildwood in northwest Atlanta and Southern Co. taking another 90,000 sf at 30 Allen Plaza under construction Downtown, as GlobeSt.com previously reported.

"In spite of the current economic climate lingering on the nation, the Atlanta office market has so far weathered the storm," Amoson says. "This year's absorption is expected to net over four million sf, making office space absorbed over the past two years upwards of eight million sf." The researcher says "the outlook for the coming quarters remains positive."

Still, Amoson says he is concerned over the strong construction pace. "With over four million sf currently under construction and other developers anxious to begin new projects, the market continues to grow," he notes. "However, only 35% of the sf being build is preleased, leaving 2.6 million sf still vacant prior to delivery." But he adds, "It is unlikely the majority of this space will remain empty on delivery."

Amoson points out "the alarming trend to this is the [expected] intra-submarket moves by existing tenants in the Atlanta market to these newer office buildings." He says "without the robust activity needed to backfill these spaces, vacancies will be created in other areas of the city." That is why "it is important for the city to continue attracting new companies to the area in order to curtail this vacancy trend in the near future," Amoson adds.