ATLANTA – Atlanta’s economy continues to outperform the nation, ranking second in job growth during the past 12 months. According to Transwestern’s third-quarter 2017 Atlanta office market report, office space absorption slowed slightly – with the exception of Midtown, which has posted more than 180,000 square feet of positive absorption so far this year – a trend that has continued from 2016 to date as owners and tenants adjust to rent increases and changing workplace dynamics. However, population and job growth continue to represent healthy demand in a steady market.
“Atlanta has experienced aggressive rent growth in every major submarket during the past two years in Class A and B office sectors,” said Keith Pierce, Senior Research Manager with Transwestern. “In reaction to rising rents in the tightening market, leading businesses are reconsidering space requirements and locations, which is showing slower demand this year than in previous years.”
Overall asking rents rose to an average of $24.90 per square foot in third quarter, with Class A rents rising to a record average of $28.50 per square foot. Third quarter reported negative absorption of 100,233 square feet in Atlanta following strong demand in the second quarter. Overall, vacancy stood at 16.4 percent.
Nearly 2 million square feet of speculative office space in Atlanta was under construction at the end of the third quarter, and new developments totaling 1.6 million square feet have already been completed this year in Buckhead, North Fulton, and the Northwest. Speculative construction is underway in most major submarkets, with 40 percent already fully pre-leased.
Additional highlights from Transwestern’s third quarter Atlanta office report include:
The Atlanta office market reports positive net absorption of about 75,000 square feet year to date, which is essentially flat in a market of this size.
Demand is stronger in urban submarkets – especially Midtown and Downtown – than in the suburbs and has been weighted heavily toward Class A space throughout the year.
The strongest quarterly absorption was seen in North Fulton, but Downtown also had a healthy quarter. Midtown and the Northwest are Atlanta’s top office performers year to date.
There is still a contest of sorts between location and cost in companies’ site selection decisions. As a result, the relatively small Class B sector in Buckhead continues to enjoy single-digit vacancy, as does the equally small Class A portion of the Northlake market, an area that is typically dominated by lower-cost properties.
Download the full report at: https://tinyurl.com/transwestern-atl-3Q2017Office.
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