From the Atlanta Business Chronicle:
For the first time during the pandemic, demand outpaced supply in the Atlanta office market
Oct 19, 2021, 7:39am EDT Updated: Oct 19, 2021, 11:33am EDT
For the first time since the pandemic began, demand outpaced supply in Atlanta’s office market, according to a new report.
The market saw 432,869 square feet of positive net absorption in the third quarter, with 394 new leases for just over 3 million square feet, according to commercial real estate services firm Newmark. That’s a sharp improvement from the second quarter, when the Atlanta market saw 132,262 square feet in negative net absorption, meaning more tenants were moving out of their space than moving in. For the year, Atlanta has seen 2.3 million square feet of negative net absorption.
Big Picture: A flight-to-quality is underway. Class A office buildings — properties that are generally new and located amid the best amenities — have landed the bulk of new office tenants. Those properties have captured 71% of the 6.9 million square feet of space leased this year.
On the move: In Midtown, Visa Inc. leased 123,000 square feet at Midtown’s 1200 Peachtree Street. In Buckhead, Novelis signed a deal for 89,533 square feet at the new One Phipps Plaza. In suburban Peachtree Corners, Intuitive Surgical leased another 54,080 square feet at 5405 Metric Place. The company expanded its existing office space at the property.
What about rents? Rents haven’t moved much over the past year. In the third quarter, office landlords were able to hold their asking rates at $29.49 per square foot. That’s only about 1.7% higher than the same time a year ago. The completion of new trophy projects such as 1105 West Peachtree and more existing high-end office space hitting the Atlanta market for lease, have allowed rental rates to hold steady.
Empty spaces: Vacancy is 22.2% across the entire market, but higher in certain districts. In Midtown, it’s just over 24%. In Buckhead, it’s 23.8%, and downtown it’s 23.3%. In the suburbs, things aren’t much better, with vacancy at 21.7%.
What’s next: There are 16 buildings under construction, totaling 3.4 million square feet. About 66% is pre-leased. No new construction starts took place during the third quarter. “New development should continue to diminish,” according to the Newmark report.