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ATLANTA-The first lease signed at the Terminus 200 office tower in the city’s Buckhead submarket is providing a needed spark to a potentially tough market. Firethorn Holdings LLC has agreed to take 50,000 square feet in the new 25-storybuilding developed by locally based Cousins Properties Inc.

Firethorn, a mobile banking and payments subsidiary of San Diego-based Qualcomm Inc., will occupy the third and fourth floors of the 564,850-square-foot building at 3333 Piedmont Road. The company is moving from smaller space at 4 Concourse Parkway, a suburban office building.

“We think this is significant, and we also think there are more deals to come,” Larry Gellerstedt, Cousins president, told the Atlanta Business Chronicle in a report published over the weekend. “We’re thrilled to have Firethorn, and also thrilled that we got this deal done amid some challenges.”

The lease at Terminus 200 comes amid research reports from several local brokerages stating that Atlanta’s office market will be further weakened in the short term by new office capacity combined with declining demand due to job cuts. Buckhead alone has four new buildings totaling 2 million square feet on the horizon.

“This is particularly troublesome as vacancy rates have the potential to surpass the 25% mark if all these buildings deliver vacant,” says Lanie Rea, research director for Jones Lang LaSalle’s Atlanta office. “Additionally, depressed levels of leasing activity in past months will undoubtedly translate to flat or negative absorption, which could cause vacancy rates to inch even higher.”

However, Rea adds that Buckhead remains one of Atlanta’s premier office submarkets and still has many active tenants in the market, along with the lowest amount of urban sublease availability. Vacancy in the Buckhead submarket through the first quarter declined to 14.5%, with asking rents of just over $26 per square foot remaining the highest in Atlanta.

However, some observers believe there could be trouble ahead for Buckhead compared to neighboring submarkets such as Midtown, where only half as much new space is under development. “There will be a lot more blood on the streets in Buckhead,” John Robbins, senior vice president of development with Shailendra Group LLC, said during a recent panel discussion hosted by law firm Arnall Golden Gregory in Midtown.

As for Atlanta’s overall office market, short-term fundamentals could be weakened by slackening demand and additional supply, possibly pushing the city’s vacancy rate beyond 20% this year, according to Marcus & Millichap. Asking rents could fall back to $20 per square foot citywide.Local employers are projected to shed 37,500 positions this year, a 1.6% decrease, following the loss of 81,600 jobs last year, Marcus & Millichap states. Among office users, 11,600 positions will be cut, or 1.8%, after 23,000 jobs were lost in 2008.

“Transaction velocity continued to taper off last year and will remain slow in 2009,” says John Leonard, Atlanta regional manager for Marcus & Millichap. “The deceleration is due to the growing disconnect between buyers and sellers.”

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