Atlanta’s Office Overall Vacancy Rate Hits 20%, But Class A Segment Shows Signs of Hope

By Jonathan Gerrard, research and marketing associate, Carter

ATLANTA (April 11, 2011) – Metro Atlanta’s overall office vacancy rate hit 20 percent in the first quarter, dragged down by more than 1 million square feet of negative net absorption of Class B space.

Midtown Atlanta skyline from west The Atlanta office market’s vacancy stood at 19.8 percent at year end 2010 and inched up to 20 percent last quarter, according to just-released information included in CoStar’s Atlanta Office Market report. At 20 percent, the market’s office vacancy rate is twice what most insiders consider equilibrium (10 percent).

That means some 41.2 million square feet of office space was vacant as of March 31, and Atlanta remains a tenant’s market – for now.

During the first quarter, Atlanta’s overall office market saw negative net absorption of 413,722 square feet, with 1.1 million of this in Class B space, according to CoStar. These factors, coupled with still-strong concessions from landlords, helped push down overall quoted rental rates to $19.39 a square foot, down from $19.64 at year end 2010.

Class C office properties recorded 144,342 square feet of negative absorption during the first quarter, CoStar said.

But, some positive signs did emerge for Atlanta’s office market during the first quarter.

The vacancy rate of Class A space dropped to 21 percent, down from 21.8 percent. And, the Class A segment has positive absorption of 838,054 square feet, according to CoStar. As a result, quoted rental rates for Class A space increased to $21.68 in the first quarter. While this represents an increase of only 9 cents per square foot, it is psychologically significant because it shows that the Class A sector likely has bottomed out.





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