Atlanta CBD Now a Landlord's Market

ATLANTA—Owners of office space in Atlanta have something to celebrate. CBD Office absorption here is at it strongest point since 2006, according to CBRE's latest quarterly Occupiers vs. Owners Market Meter.”

In fact, CBRE has named 19 owner-favorable markets in the U.S. and Atlanta is one of them, with 2.5 million square feet of net absorption. Other downtown markets across the country that saw the strongest annual total since 2006 are Manhattan, Houston, San Jose, Dallas/Ft. Worth and Orange County.

“A lack of big block availability in core submarkets and incremental occupancy gains in the class A sector have led to a gradual shift in market fundamentals, where landlords are now in the driver's seat,” Dan Wagner, Southeast research director for CBRE, tells GlobeSt.com. “Owners see opportunity for rent growth in today's environment, and a lack of new supply on the horizon indicates space availability will tighten near-term.”

What's fueling the demand? Across the board, the high-tech sector is chipping in big. The high-tech sector accounted for 19% of 2014's largest lease transactions by square footage across the country. This represents a significant jump over the year prior, where high tech accounted for 13.6% of the largest office space lease transactions. Financial services, business services, healthcare/life sciences and creative services rounded out the top five sectors for leasing activity in major markets in 2014.

“The short-term outlook is for high tech, financial services and government to be the most active industries leasing office space,” says Colin Yasukochi, director of Research and Analysis for CBRE. “As supply is slow to respond to this growing demand, tenants can expect to see rising occupancy costs, which will compel many to consider ways to achieve more efficient footprints through workplace strategy, or to explore lower cost sub-markets.”

According to the CBRE report, US economic growth is expected to further boost office space demand over the next three years, leading to tight market conditions and higher rents—10 of the 14 major downtown markets and eight of the 13 major suburban markets surveyed by CBRE Research are expecting rents to rise in 2015.  Vacancy should continue its downward trend in the near term, the firm predicts, bottoming out at 12.2 percent in 2018.