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ATLANTA- After two years of exceptional absorption in the retail sector, absorption has slowed and occupancies have increased.

For the past two years, absorption levels averaged around 4 million sf, but so far this year only 1.3 million sf have been absorbed, according to a recent report from Atlanta-based retail research firm Bullock Mannelly Partners Inc.

Moreover, with more than 165 million sf of gross leasable area, overall vacancy levels have increased for the third consecutive quarter to a third quarter rate of 8.3%, up from a second quarter rate of 8.2%.On a positive note, 7 of the 11 submarkets covered by Bullock Mannelly showed an improvement in their vacancy rates, with only Georgia 400, North Cobb, South Atlanta and South Metro showing increased vacancy rates. Of all submarkets, Buckhead continues to register the lowest vacancy rate of 4%, while the South Metro submarket recorded the highest vacancy rate of 13.8%.

The increasing vacancy rates can be attributed in part to new construction. More than 14 million sf of space has been delivered over the past three years. “With no physical barriers to entry, it is anticipated that the Atlanta market will continue a strong growth pattern as people relocate to the region for an improved quality of life and better job opportunities,” the report says.

Although 3.6 million sf of retail space has been delivered over the past 12 months, for the past ten quarters, the amount of space under construction has remained fairly constant at around 3 million sf. That amount is much lower than the peak of almost 7 million sf under construction during the first two quarters of 2001. Currently, 2.9 million square feet of space is under construction in metro Atlanta.

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