Third Quarter Atlanta Office & Industrial Market Update
The third quarter 2009 overall vacancy rate for the metro Atlanta office market was 18.9 percent, up from 16.6 percent in third quarter 2008. Net absorption was negative 1.4 million square feet, down from 16,000 square feet one year ago, but 1.3 million square feet of this alone was in Class B office space across the metro area. Large Class B office tenants, such as Firethorn, First Data Corporation, and Winter Construction have all traded up to Class A space in 2009 to take advantage of the down market. Construction continued to slow significantly to 1.8 million square feet, down from 5.1 million square feet under construction at this time last year. In response to the negative job growth and the overall economic slowdown – no speculative office buildings in any class or submarket started construction in third quarter 2009.
“The positive news in these numbers is that it is a great time to be a tenant if you are one that can make a commitment to a new lease term of at least five years or can extend your current lease five years beyond the current expiration date,” stated Carter Vice-President, Bradley Haertel. “Landlord’s are willing to provide significant concessions to new good credit tenants or to lower an existing tenant’s current rent for the remainder of the current lease term and provide aggressive rates for an extension term.”
The overall vacancy rate for the metro Atlanta industrial market was 12.6 percent at the close of the third quarter, up from 11.1 percent one year ago. While total annual net absorption across the metro area continued to drop, posting negative 3.2 million square feet year-to-date, third quarter absorption was just positive, at 180,000 square feet. Only one 20,000 square foot industrial building is under construction in all of metro Atlanta, which is home to over 560 million square feet of flex, warehouse and distribution space. This virtual standstill in construction over the past year is directly responsible for stabilizing the market at a much quicker pace then the office market in Metro Atlanta.
“Atlanta is still the distribution hub of the Southeast. At present, the only major players out in the market are in the food services and medical industries”, said Carter Senior-Vice President Skip Petters. “This is exemplified by the General Mills, Kraft, and Dendreon recent deals. As the economy strengthens, the smaller entrepreneurial tenants, which make up the bulk of the 560 million square foot market, will begin to expand and will drive growth in the Atlanta industrial market once again.”
*Data provided by Costar Group, Inc, with interpretation by Carter’s Research Department. Statistical set includes office buildings greater than 15,000 square feet that are multi-tenant, and not owner-occupied.