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ATLANTA-Leasing activity in the local office market has fallen by as much as 60% over the past year, yet brokers are getting plenty of calls from companies seeking better and bigger space options, according to recent research reports. A combination of sublease and newly built space is attracting greater interest by prospective tenants, though some are opting to stay put or expand within their current buildings.

At least 6.3 million square feet of active office requirements are being tracked by Jones Lang LaSalle through the third quarter as more firms explore space availability in the tenant-favorable marketplace. At least 1.2 million square feet is being scouted in the Midtown submarket, while Downtown and Buckhead are also attracting attention.

Whether this means major moves are imminent remains to be seen. For example, healthcare company Kaiser Permanente shopped around for more than 18 months before deciding to renew and add to its offices at Piedmont Center, totaling 212, 000 square feet, according to Jones Lang LaSalle, which handled the September transaction.

“Tenants are beginning to feel more comfortable in making longer-term leasing decisions, possibly signaling the beginnings of an economic recovery,” says Lanie Rea, research manager with Jones Lang LaSalle’s Atlanta office. She notes, however, that the local market is still a long way from stabilization as vacancies have yet to peak.

Atlanta’s overall office vacancy rate through the third quarter reached 21.6%, while average asking rents stabilized at $21 per square foot annually, nearly $24 for class A space, Jones Lang LaSalle reports. Buckhead continues to command the highest rents at more than $25 per square foot.

The office market posted 1.4 million square feet of negative overall absorption through the first nine months of 2009, mostly in suburban submarkets, according to Cushman & Wakefield. That far exceeds the minus-830,000 square feet recorded by the brokerage in all of 2008.

Sublease vacancies have doubled from the start of this year to more than 3.1 million square feet, their highest level since 2004, says Chris Shaner, senior research associate with Cushman & Wakefield in Atlanta. The Central Perimeter, Northwest Atlanta, CBD and Midtown markets reported the highest levels of sublease vacancies in the third quarter, he says.

Only 1.4 million square feet of office properties have traded so far this year in Atlanta, Shaner says. The largest transaction involved the foreclosure sale of Downtown’s Equitable Building for only $29.5 million, or about $50 per square foot.

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