Strong start Atlanta 2014 - Cushman & Wakefield

Strong start for Atlanta office in 2014

Atlanta’s office market took off running in the first quarter of 2014 as the overall vacancy rate dipped to 19 percent, according to first quarter statistics released by Cushman & Wakefield. The increased momentum of occupancy gains translated into a 20 basis point decrease in vacancy from 2013 year-end and a 120 basis point decrease year-over-year.

C&W Research revealed absorption for the first quarter of 2014 totaled 816,305 square feet, the strongest quarterly absorption the Atlanta market has seen since the third quarter of 2012 and almost double the absorption the market posted during the last quarter of 2013.

The market’s largest lease deals during the first quarter included Fiserv, which signed a 380,300-square-foot lease at 12525 Cingular Way in the Georgia 400 submarket. Another notable signing was CH2M Hill’s 97,000-square-foot lease at 6600 Peachtree Dunwoody Road in the Central Perimeter submarket.

“Atlanta’s office market got off to a great start in 2014 as the pace of occupancy gains picked up,” said Will Porter, a leasing manager in C&W’s Atlanta Corporate Occupier and Investor Services practice. “We are finally seeing markets that have been slower to recover, such as Midtown and Downtown, post consistent positive net absorption. Buckhead and Central Perimeter have led Atlanta’s recovery and continued to tighten during the first quarter. We are even beginning to see rent growth in these high-demand markets, particularly in class A buildings.  Atlanta’s office market should gain momentum going forward in 2014 as tenant activity remains healthy and vacancies continue to decline.”

Overall average asking rents began to increase, albeit marginally, averaging $20.94 per square foot as of the end of the first quarter, up 10 basis points from $20.91 one year ago.  Notably, overall class A asking rents have increased 1.6 percent year-over-year to an average of $24.07 per square foot as Atlanta’s class A market continued to tighten.

Development remained tempered. Construction for Atlanta’s three current office projects – Buckhead Atlanta, Ponce City Market in Midtown and Avalon in Alpharetta – are all well under way.  Buckhead Atlanta will initially include 100,000 square feet of office space, which is expected to deliver during the second quarter of 2014. The Ponce City Market mixed-use development in Midtown has also made significant headway towards completion. Ponce City Market will include 450,000 square feet of office space, expected to deliver during the third quarter of 2014. Lastly, the Avalon project in Alpharetta will include a total of 111,000 square feet of spec office space, which is also expected to deliver during the third quarter of 2014.

Investment sales activity in the Atlanta market slowed slightly compared to the strong quarterly activity in 2013. Overall investor sales activity totaled 2.1 million square feet in the first quarter, the weakest quarterly investment sales activity the market has seen since the second quarter of 2012 and 34 percent below investment sales activity posted during the first quarter of 2013; however, we expect activity to pick up throughout the remainder of 2014. Key sale transactions included the sale of Centrum at Glenridge for $28.5 million in February.

Highlights:

  • Leasing activity for 1Q 2014 totaled 2.3 million square feet, 11.3 percent more activity than the Atlanta market posted during 1Q 2013.
  • Overall absorption for 1Q 2014 totaled 816,305 square feet, the strongest quarterly absorption since 3Q 2012.  
  • Overall vacancy (direct and sublease) ended 1Q 2014 at 19.0 percent, down 120 basis points compared to 20.2 percent one year ago.
  • Notably, the Central Perimeter and NW/Cumberland/Galleria submarkets captured the strongest absorption of Atlanta’s 13 suburban markets and Midtown captured the strongest absorption of Atlanta’s three CBD markets.
  • Overall average asking rents ended the first quarter of 2014 at $20.94 per square foot, up 10 basis points from $20.91 reported one year ago. 
  • Overall class A asking rents increased 160 basis points year-over-year to an average of $24.07 per square foot as Atlanta’s class A market began to tighten.
  • Overall investor sales activity totaled 2.1 million square feet in the first quarter, the weakest quarterly investment sales activity since the second quarter of 2012 and 34 percent below investment sales activity posted during the first quarter of 2013.

Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and assignments. Founded in 1917, it has 253 offices in 60 countries and nearly 15,000 employees. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has more than $3.7 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.