ATLANTA-Tenants rule the roost in the city’s five major office leasing submarkets but that scenario is expected to change by year end, according to a new industry analysis by locally based Richard Bowers & Co., the largest local real estate brokerage firm in the metro market.

With 23 million sf available and rents decreasing slightly, landlords continue to offer concessions and flexible terms. However, “because of an improving economy and continued job growth, a significant reduction in sublease space and only 140,000 sf of new deliveries scheduled for the remainder of the year, the office market will improve through year end 2004 and into 2005,” predicts Richard Smith Jr., a broker at Richard Bowers & Co. who participated in assembling the second-quarter office report.

Positive absorption for the quarter totaled 471,047 sf which Smith calls “healthy, but not as robust as we expected.” Rental rates dropped by 16 cents per sf to an average $20.24 per sf. The 514,314-sf SouthTrust building at Atlantic Station was the only new delivery during the quarter.

Limited new construction scheduled for 2005, totaling only 420,000 sf, is also expected to improve the area’s office leasing sector. “We anticipate at least two million sf of positive absorption for the remainder of 2004, which will result in occupancy rates increasing by more than a percentage point to 83.2% from the current 81.7%,” Smith says.

The Richard Bowers & Co. research staff expects average rental rates to increase from the current $20.24 per sf to about $21 per sf by year end 2004. Concessions and tenant improvement allowances will decrease “and become less favorable for users,” the researchers predict.

The leading submarkets in net absorption were the I-285/GA 400 area at 459,673 sf, followed by Midtown at 241,935 sf and Buckhead at 72,812 sf. “The Central Business District experienced significant negative absorption in the second quarter due to losses that occurred at Inforum, 55 Park Place and One Georgia Center,” Smith says. Downtown net absorption for the quarter was a negative 315,489 sf. Year-to-date, the absorption is a negative 616,618 sf.

“The loss at One Georgia Center resulted mainly from SouthTrust Bank’s relocation to Atlantic Station, which also accounted for more than half of Midtown’s positive absorption,” Smith says. Of the five largest submarkets, Buckhead has the highest occupancy rate at 86.2%, followed by Downtown at 82.8%; I-75/I-285 at 82.7%; and Midtown at 81.3%. The I-285/GA 400 and GA 400 North submarkets “remain somewhat below” 80% occupancy, the broker says.

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