Cushman & Wakefield today released first-quarter 2015 statistics for the Atlanta office market that show it continued to improve as strong occupancy gains translated into a 20-basis-point decrease in vacancy since 2014 year-end, ending the quarter at 17.6 percent. Overall average asking rents increased by 2.5 percent, marking the strongest quarterly rent growth the market has seen in over 10 years.
C&W Research revealed the market continued to capture consistently healthy absorption during the first quarter, totaling 804,563 square feet. The Atlanta market has seen 13 consecutive quarters of net-occupancy gains, with the first quarter of 2015 marking the second strongest quarter in terms of absorption over the past 2 years. These healthy net-occupancy gains continue to drive Atlanta’s vacancy downward toward pre-recession levels.
The market’s largest new lease deals during the first quarter included Comcast Cable Communication’s 300,000-square-foot lease for the entire proposed SunTrust Park office building in the Northwest/Cumberland/Galleria submarket. Additionally, Mercedes-Benz leased 90,000 square feet at Sterling Pointe II in the Central Perimeter submarket and Comcast Cable Communications leased 88,000 square feet at 6200 The Corners Parkway, also in the Peachtree Corners submarket.
“As existing office inventory tightens and rates move upward, the effective rates are feeling an even greater impact as landlords dial back free rent and tenant improvement allowances,” said Chad Koenig, a Senior Director with C&W’s Tenant Advisory Group. “Concessions are still readily available, but just not at the same level we have been accustomed to seeing over the last few years.”
Averaging $21.91 per square foot as of the end of the first quarter, overall average asking rents continued their surge in the Atlanta area. Notably, overall class A asking rents increased 2.3 percent over the same time period to an average of $25.23 per square foot, as Atlanta’s class A market continued to tighten, particularly in submarkets like Buckhead and Central Perimeter.
Although Atlanta’s construction pipeline for new office space remains conservative, several projects are well under way, including Three Alliance, Tishman Speyer’s much-anticipated 500,000-square-foot class A office tower in the heart of Buckhead. There were no notable project deliveries during the first quarter of 2015.
Investment sales activity in the Atlanta market totaled 2.5 million square feet during the first quarter of 2015 and was off to a slow start following a pickup in activity during the second half of the 2014. Key sale transactions for the quarter included the sale of Pinnacle and Buckhead’s Two Live Oak, which sold to The Brookdale Group for $201 million in January, and the sale of One Buckhead Plaza, which sold to Parkway Properties for $157 million in January. Atlanta’s investment sales pipeline is strengthening, and we expect to see a significant pickup in transactions throughout the remainder of 2015.
- Overall average asking rents ended the first quarter at $21.91 per square foot, up 2.5 percent during the quarter, marking the strongest quarterly rent growth the market has seen in over 10 years.
- Overall class A asking rents increased 2.3 percent year-over-year to an average of $25.23 per square foot as Atlanta’s class A market continued to tighten.
- Leasing activity during the first quarter totaled 2.7 million square feet, down slightly by 1 percent from the stronger pace reported during the first quarter of 2013.
- Overall absorption for the quarter totaled 804,563 square feet; although the quarter lags compared to strong absorption posted during the second quarter of 2014, it is the second strongest quarterly absorption Atlanta has posted in the past two years.
- Overall vacancy (direct and sublease) ended the quarter at 17.6 percent, down 20 basis points compared to 17.8 percent one year ago.
- Notably, Midtown captured the strongest absorption of Atlanta’s major office submarkets, totaling 478,643 square feet, driven primarily by move-ins at Ponce City Market.
- Overall investor sales activity during the first quarter lagged, totaling 2.5 million square feet, slightly behind the 2014 pace over the same time period by 8.4 percent.