After marginal improvement in the first half of 2011, the Atlanta office market posted negative absorption during the third quarter, signifying softening market conditions according to statistics recently released by Cushman & Wakefield.
The market recorded 761,574 square feet of negative overall absorption during third quarter, resulting in 501,309 square feet of negative overall absorption year-to-date. Absorption - the measure of net change in occupied space - was positive during the first two quarters of the year.
Overall vacancy (direct and sublease) increased to 22.2 percent from 21.8 percent reported at the end of the second quarter, and is again on par with the 22.0 percent recorded at year-end 2010. Notably, sublease vacancies decreased for a seventh straight quarter to just over 1.8 million square feet as a result of strong leasing activity.
Overall leasing activity totaled nearly 3.1 million square feet for the quarter resulting in more than 7.0 million square feet leased year-to-date, slightly behind the pace of leasing activity set in 2010.The market's largest third quarter lease deals included Primerica Insurance's 344,476-sf build-to-suit project with an estimated completion in April 2013; SunTrust Robinson Humphrey's 135,500-sf at Atlanta Financial Center; and Ace Insurance's 100,000-sf at Royal Centre Two in Alpharetta.
"Lingering unemployment, a volatile stock market, and declining consumer confidence certainly had an impact on Atlanta's forward momentum during third quarter. Looking forward, however, there is certainly cause for optimism," said Mike Elting, Executive Vice President for the Atlanta region. "Steady leasing activity and the lack of new product from the development sector should result in the gradual absorption of existing vacant product."
Overall average asking rental rates declined 1.2 percent to $20.79 per square foot from $21.05 per square foot in second quarter while overall class A asking rental rates dropped to an average of $23.46 per square foot.
Although development activity remained scarce, the re-development of Midtown's Ponce City Market was announced and will include 450,000 square feet of office space scheduled for completion in the fall of 2013.
Year-to-date investment sales volume is well ahead of the 2010 pace. Atlanta recorded more than 3.5 million square feet of investment sales activity during third quarter alone, resulting in a total of more than 6.6 million square feet year-to-date.