Deals Take Some Sting Out Of Challenging Office Market

By Elizabeth Jinks, Director, Carter

Atlanta (May 1, 2010) – The first quarter 2010 overall vacancy rate for the metro Atlanta office market was 20.1 percent,up from 17.2 percent one year ago.

Net absorption for all classes was negative 142,000 square feet, yet was still the best showing since fourthTwo Alliance 3 quarter 2008, and Class A absorption was actually positive this quarter with 171,000 square feet. Construction continued to slow significantly to just 68,000 square feet,down incredibly from 4 million square feet at this time last year. But, increasing vacancy rates and negative net absorption were not too bad considering there were 1.7 million square feet of deliveries this quarter alone.

Vacancy in Buckhead jumped to 25.3 percent, buta few big deals in the four new office towers (totaling 2 million square feet of Class Aspace added since July 2009) have softened the blow of what some have called “the worst submarket in America.”

Below is a snapshot of the leasing seen in these four Buckhead properties:

  • Two Alliance (right) Delivered July2009 – 493,000 square feet – 60 percent leased; Marsh & McLennan (126,613 squarefeet), Novelis (100,000-square feet), Thompson Hine (30,000 square feet), TurnerConstruction Company (126,613 square feet)
  • Terminus 200Delivered Sept. 2009 – 564,850 square feet – 10 percent leased; Firethorn (49,789 squarefeet), Servcorp (5,200 square feet)
  • Phipps TowerDelivered Feb.2010 – 486,000 square feet – 13 percent leased; Northwestern Mutual-Goodwin, Wright(50,000 square feet), Speakeasy (13,000 square feet)
  • 3630 PeachtreeDelivered March 2010 – 428,785 square feet – 2 percent leased; Mansell Group(7,200-square feet)

The overall vacancy rate for the metro Atlanta industrial market was 13.3 percent at the close of first quarter 2010, up from 12.4 percent one year ago.

Total annual net absorption across the metro areafell to negative1.8 million square feet, following the negative trend that began atmid-year 2008.

There were a few big deals in the first quarter – Clorox andColgateleased 1.1 million square feet and 744,000 square feet, respectively. Thenumber of new spec buildings completed in the first quarter – zero – and an activetenants’ market suggest vacancy should decline as 2010 progresses.

I-20West/Fulton Industrial was the only submarket that posted positive net absorption of all the industrial submarkets, with close to 600,000 square feet, due inlarge part to the Colgate deal with IDI. 1.6 million square feet of industrial space were under construction at the end of the quarter – 1.4 million square feet of which were in two buildings in the south Atlanta submarket developed by Majestic Realty that are 100 percent pre-leased to Kraft and Dendreon Corp.

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