Office Slump Stretches into Third Quarter

ATLANTA-The slowdown in the Atlanta office real estate market continued in the third quarter of 2001, according to figures by locally based Richard Bowers & Co.

The numbers reflect a continued slowdown in the economy from yearend 2000 with 560,751 square feet of net absorption, an increase of about 260,000 square feet over the second quarter.

Rental rates also decreased from $21.64 per sf to $21.58 per sf. With deliveries of 1.6 million sf, vacancy rates decreased from 90.3% to 89.39%. Square footage availability also increased over one million sf to 12.76 million sf.

The Bowers report anticipates the fourth quarter will improve, even though 2.25 million sf will be delivered with a large amount being in two large urban developments, Alliance Center in Buckhead and the Millennium in Midtown. In addition, sublease space has increased from 4.5 million sf to 5.3 million sf.

The report anticipates fourth quarter absorption will be the highest for any quarter this year. With deliveries totaling 4.3 million sf and absorption estimated between 2.5 million sf and three million square feet, additional space in the three million to 3.5 million sf range will be available at year-end.

Deliveries for 2002 will decrease to approximately 1.2 million sf. This slowdown in construction will continue through 2003 for a number of submarkets.

The urban corridor has remained relatively stable with rental rates decreasing to $24.28 per sf from $24.32 per sf and occupancy levels decreasing to 92.55% from 93.2%.

The suburbs also have decreased in occupancy to 87.92% from 88.9%. Rental rates have dipped from $20.37 per sf at mid-year to $20.33 per sf for the third quarter.

The GA-400 North submarket led the quarter in absorption with 430,815 sf and is also the leading submarket in absorption for 2001. Nonetheless, occupancy rates continue to decrease to 81.5% with deliveries totaling 1.96 sf year to date.

The GA-400 North sector also leads all submarkets in space available with about 2.5 million sf. Midtown was the second leading submarket in absorption with 307,279 sf for the third quarter and is also the second leading submarket in absorption for the year to date.