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Q1 2011 | OFFICE

ATLANTA

MARKET REPORT

Atlanta Office: Contractions > Expansions in Q1


The Atlanta office market continues to bounce along the bottom as witnessed through the loss of
occupancy starting the year. First quarter office absorption was negative; move-outs trumping
move-ins by 153,163 square feet. The amount of occupancy lost pales in comparison to the drops
experienced in 2009; still, more space given back adds to the glut of vacancy already in the market,
and also shows the reality of Atlanta’s current office market situation. This quarter’s negative
absorption was mostly due to contractions outweighing expansions in the market. Current office
demand in Atlanta leans overwhelmingly towards existing tenants with lease terms coming due.
These companies, seeking more efficiency in their office space usage, are taking advantage of
current conditions and moving into more manageable, higher quality and sometimes economically
feasible spaces. Two examples of this occurred in first quarter. SunTrust signed a lease two
MARKET INDICATORS
years ago to move from Class B office to Class A office, downsizing from 358,000 square feet to
Projected 254,000 square feet. The move occurred this quarter resulting in 104,000 square feet of vacant
Q1 2011 Q2 2011
space added Downtown. The advertising agency J. Walter Thompson also contracted its space
usage in first quarter moving from two office locations in Central Perimeter to one of the new
VACANCY — —
towers in Buckhead. The consolidation resulted in a 36,000 square feet occupancy loss. Despite
NET ABSORPTION these, Atlanta saw a number of expansions in first quarter as well with Coca-Cola’s move from flex
property into 148,000 square feet of Class A office in North Fulton being the largest of the period.
CONSTRUCTION

RENTAL RATE — Going forward, a holding pattern remains in effect for Atlanta’s office market. The job growth
catalyst needed to transition to full recovery remains elusive for the time being. Companies need to
CAP RATES — feel more confident in the pace of the nation’s economic recovery before increasing their payrolls.
Given the current volatility of macro-economic conditions, the status quo will likely remain. Second
quarter office leasing should continue at its current pace in Atlanta with contractions and expansions
continued on page 2

ATLANTA OFFICE
NEW SUPPLY, ABSORPTION AND VACANCY RATES
UPDATE
Atlanta Rental Rates
The Atlanta office market
Overall Market & Class A (per sq. ft.) 6,000,000 25% slipped back to
$24.00
$25.00 negative absorption in
5,000,000 First Quarter 2011 with
$24.00
$23.00
4,000,000 20% occupancy dropping by
$23.00
$22.00 153,163 SF. Despite the
$22.00 3,000,000 drop, vacancy remained
$21.00 15%
Square Feet

$21.00
2,000,000 relatively flat with the
$20.00 overall rate at 18.3%.
$20.00
1,000,000 There were no deliveries
$19.00
$19.00 10%
0 in the first quarter and
$18.00
$18.00
only three buildings
2002

2003

2007

2008
2004

2005

2009
2006

2011
2010

$17.00
$17.00
(1,000,000) 5% totaling 331,104 SF are
2008

2009

2010
2008

2009

2010

2011

(2,000,000) under construction.


Atlanta’s office inventory
Class A Market AVG (3,000,000) 0% stands at just over
Absorption Deliveries Vacancy % 214 million sq. ft.

www.colliers.com/atlanta
MARKET REPORT | Q1 2011 | OFFICE | ATLANTA

remaining relatively balanced. Most of the activity taking place over the next few months will range
DEFINITIONS between 10,000 to 25,000 square feet. A number of large deals continue to scour the market;
however, most are companies with existing offices in the area. Also, the likelihood of these tenants
Absorption (Net)-The net change in
renewing their space is high. Without new demand, the number of sizeable deals in the market could
occupied space over a given period of time,
diminish quickly. The expansion of tech industry companies in Atlanta could be the answer to this
calculated by summing all the positive
changes in occupancy and subtracting all the
problem. In fact, Atlanta’s tech sector could provide the jolt needed to jump start the office market
negative changes in occupancy. recovery here. Recent announcements by Advanced Micro Devices, Hewlett-Packard and
ThyssenKrupp exemplify this best. Over 500 technology jobs are expected to be generated by these
Vacancy Rate-A percentage of the total companies in the next couple of years either through expansion or new entry into the market.
amount of physically vacant space divided by
the total amount of existing inventory. VACANCY & AVAILABILITY ABSORPTION & LEASING ACTIVITY
• Atlanta office vacancy showed little movement • As a sign companies continue to take advantage
Vacant Space-Space that is not currently of favorable market conditions to move up in
in the first quarter, and also since this time last
occupied by a tenant, regardless of any lease
year. The overall rate remains steady at 18.3% quality, Class A absorption was positive for the
obligation on the space.
• Class A properties are seeing the most fifth straight quarter.
Sublease Space-Space that has been movement in vacancy levels. The Class A • Leasing activity was steady throughout the
leased by a tenant and is being offered for lease vacancy rate is down 0.8% in first quarter and quarter; nothing spectacular but lively enough
back to the market by the tenant with the lease down 1.1% from a year ago. The occupancy to not cause worry. Professional service firms
obligation. gains for this product type come at the expense were most active in the quarter.
of Class B properties where vacancy has • One reason office demand is stagnant is due to
Deliveries-Buildings that complete
increased for three consecutive quarters.
construction during a specified period of time. the lack of mobility. Company relocation and
A certificate of occupancy must have been • Sublease availabilities decreased for the third expansion plans are being affected by the
issued for the property for it to be considered straight quarter, dropping 240,000 SF this period. inability to move employees.
delivered.
Q1 2011 | Vacant Space By Type Q1 2011 | Net Absorption by Submarket
Leasing Activity-The volume of square
footage that is committed to and signed 300,000

CENTRAL PERIMETER
for under a lease obligation for a specific

SOUTH ATLANTA
building or market in a given period of 200,000

WEST ATLANTA
time. It includes direct leases, subleases and

NORTHEAST

NORTHLAKE

DOWNTOWN

MIDTOWN
CLASS B
renewals of existing leases. It also includes CLASS A 100,000
15,868,921 SF
Square Feet

any pre-leasing activity for buildings under 19,747,887 SF


VCY RATE = 17.9%
VCY RATE = 18.6%
construction or planned. 0
NORTH FULTON

BUCKHEAD

NORTHWEST
Build-to-Suit-A term describing property that CLASS C
(100,000))
3,604,616 SF
was developed specifically for a certain tenant
VCY RATE = 18.3%
to occupy. Can be either leased or owned by
(200,000))
the tenant.

Class A Class B Class C (300,000))

UPDATE Recent Transactions in the Market

SALES ACTIVITY

PROPERTY SUBMARKET SALES DATE SALE PRICE SIZE SF PRICE / SF BUYER


3344 Peachtree Buckhead 1/21/2011 $167,300,000 483,726 $345.86 Parkway Properties
55 Allen Plaza Downtown 4/5/2011 $57,000,000 348,658 $163.48 Teachers Retirement of Ill.
Two Ravinia Central Perimeter NA NA 437,826 NA Parkway Properties
Druid Chase Northlake 2/11/2011 $7,750,000 113,820 $68.09 Atlanta Property Group
LEASING ACTIVITY

PROPERTY SUBMARKET TENANT LANDLORD SIZE SF TYPE


SunTrust Plaza Downtown McKenna Long & Aldrige SunTurst Plaza Assoc. 163,000 Class A Renewal
1075 Peachtree Midtown PriceWaterhouseCoopers Daniel Corporation 142,115 Class A Lease
Centennial Tower Downtown Turner Broadcasting Jackson Oats Shaw 115,000 Class A Renewal & Expansion
100 Milton Park North Fulton Cellnet Technology Talcott Realty Investors 79,879 Class A Renewal

P. 2 | COLLIERS INTERNATIONAL
MARKET REPORT | Q1 2011 | OFFICE | ATLANTA

UPDATE Market Comparisons

EXISTING PROPERTIES VACANCY ABSORPTION DELIVERIES U/C RENT


BLDGS
CLASS

DIRECT DIRECT SUB SUB TOTAL VCY VCY NET NET NEW NEW UNDER AVG
TOTAL VCY VCY VCY VCY VCY CURR PRIOR ABSORP ABSORP SUPPLY SUPPLY CONSTR RENT
SF SF % SF % SF % % CURR SF YTD SF CURR SF YTD SF SF RATE

URBAN
DOWNTOWN
A 26 13,612,159 1,925,270 14.1% 507,127 3.7% 2,432,397 17.9% 19.6% 240,325 240,325 - - - $19.80
B 78 9,512,158 1,108,481 11.7% 5,280 0.1% 1,113,761 11.7% 7.7% (383,735) (383,735) - - - $15.60
C 71 3,378,318 719,327 21.3% - - 719,327 21.3% 19.8% (49,099) (49,099) - - - $14.53
Total 175 26,502,635 3,753,078 14.2% 512,407 1.9% 4,265,485 16.1% 15.4% (192,509) (192,509) - - - $18.47

MIDTOWN
A 39 15,281,304 3,111,126 20.4% 203,451 1.3% 3,314,577 21.7% 22.0% 44,742 44,742 - - - $25.28
B 98 6,000,764 1,069,829 17.8% 17,827 0.3% 1,087,656 18.1% 13.1% (302,961) (302,961) - - - $18.37
C 35 775,588 91,418 11.8% 11,424 1.5% 102,842 13.3% 13.4% 1,384 1,384 - - - $13.63
Total 172 22,057,656 4,272,373 19.4% 232,702 1.1% 4,505,075 20.4% 19.3% (256,835) (256,835) - - - $23.86

BUCKHEAD
A 51 14,940,660 3,382,083 22.6% 226,437 1.5% 3,608,520 24.2% 25.6% 221,413 221,413 - - - $25.06
B 52 4,504,149 789,498 17.5% 31,491 0.7% 820,989 18.2% 18.3% 2,356 2,356 - - - $18.07
C 44 1,073,997 49,650 4.6% - - 49,650 4.6% 4.0% (6,618) (6,618) - - - $17.58
Total 147 20,518,806 4,221,231 20.6% 257,928 1.3% 4,479,159 21.8% 22.9% 217,151 217,151 - - - $23.81

URBAN TOTAL
A 116 43,834,123 8,418,479 19.2% 937,015 2.1% 9,355,494 21.3% 22.5% 506,480 506,480 - - - $23.38
B 228 20,017,071 2,967,808 14.8% 54,598 0.3% 3,022,406 15.1% 11.7% (684,340) (684,340) - - - $17.35
C 150 5,227,903 860,395 16.5% 11,424 0.2% 871,819 16.7% 15.6% (54,333) (54,333) - - - $15.25
Total 494 69,079,097 12,246,682 17.7% 1,003,037 1.5% 13,249,719 19.2% 18.8% (232,193) (232,193) - - - $22.05

SUBURBAN
CENTRAL PERIMETER
A 71 19,921,407 3,444,619 17.3% 81,419 0.4% 3,526,038 17.7% 18.2% 92,622 92,622 - - 300,000 $22.05
B 135 7,367,209 1,759,713 23.9% 73,134 1.0% 1,832,847 24.9% 21.7% (231,651) (231,651) - - - $18.03
C 100 1,735,102 441,134 25.4% - - 441,134 25.4% 24.9% (9,733) (9,733) - - - $13.94
Total 306 29,023,718 5,645,466 19.5% 154,553 0.5% 5,800,019 20.0% 19.5% (148,762) (148,762) - - 300,000 $20.34

NORTH FULTON
A 96 15,106,162 1,745,689 11.6% 374,794 2.5% 2,120,483 14.0% 14.9% 131,643 131,643 - - - $19.98
B 325 11,350,146 2,049,094 18.1% 96,605 0.9% 2,145,699 18.9% 20.1% 136,612 136,612 - - - $14.74
C 58 1,005,388 118,009 11.7% 6,533 0.6% 124,542 12.4% 10.9% (14,961) (14,961) - - - $14.74
Total 479 27,461,696 3,912,792 14.2% 477,932 1.7% 4,390,724 16.0% 16.9% 253,294 253,294 - - - $17.47

NORTHEAST ATLANTA
A 58 6,639,286 1,320,955 19.9% 13,685 0.2% 1,334,640 20.1% 20.4% 21,251 21,251 - - - $19.84
B 402 13,282,399 2,679,992 20.2% 114,287 0.9% 2,794,279 21.0% 20.8% (28,899) (28,899) - - - $14.50
C 115 2,048,138 240,836 11.8% 3,595 0.2% 244,431 11.9% 11.6% (5,904) (5,904) - - - $14.26
Total 575 21,969,823 4,241,783 19.3% 131,567 0.6% 4,373,350 19.9% 19.8% (13,552) (13,552) - - - $16.46

NORTHLAKE
A 15 2,080,955 398,880 19.2% 4,777 0.2% 403,657 19.4% 19.0% (8,224) (8,224) - - - $19.78
B 318 11,596,560 1,646,446 14.2% 138,524 1.2% 1,784,970 15.4% 15.0% (40,570) (40,570) - - - $16.71
C 162 3,375,031 381,947 11.3% - - 381,947 11.3% 11.9% 19,665 19,665 - - - $14.87
Total 495 17,052,546 2,427,273 14.2% 143,301 0.8% 2,570,574 15.1% 14.9% (29,129) (29,129) - - - $16.88

NORTHWEST ATLANTA
A 75 17,307,883 2,305,639 13.3% 359,720 2.1% 2,665,359 15.4% 15.7% 47,004 47,004 - - - $21.34
B 421 15,963,743 2,950,811 18.5% 126,482 0.8% 3,077,293 19.3% 19.4% 13,069 13,069 - - 16,650 $15.54
C 141 2,513,344 343,147 13.7% 1,400 0.1% 344,547 13.7% 13.8% 3,277 3,277 - - - $13.66
Total 637 35,784,970 5,599,597 15.6% 487,602 1.4% 6,087,199 17.0% 17.2% 63,350 63,350 - - 16,650 $18.04

SOUTH ATLANTA
A 15 1,082,749 321,681 29.7% 20,535 1.9% 342,216 31.6% 31.9% 3,079 3,079 - - - $20.45
B 222 7,737,011 1,037,615 13.4% 42,557 0.6% 1,080,172 14.0% 13.6% (30,439) (30,439) - - 14,454 $16.19
C 106 2,077,173 442,709 21.3% - - 442,709 21.3% 21.2% (2,034) (2,034) - - - $13.55
Total 343 10,896,933 1,802,005 16.5% 63,092 0.6% 1,865,097 17.1% 16.8% (29,394) (29,394) - - 14,454 $16.60

WEST ATLANTA
A 1 42,660 - - - - - 0.0% 0.0% - - - - - -
B 45 1,208,732 131,255 10.9% - - 131,255 10.9% 11.3% 4,967 4,967 - - - $15.69
C 33 1,699,418 753,487 44.3% - - 753,487 44.3% 43.1% (21,744) (21,744) - - - $11.28
Total 79 2,950,810 884,742 30.0% - - 884,742 30.0% 29.4% (16,777) (16,777) - - - $13.26

SUBURBAN TOTAL
A 331 62,181,102 9,537,463 15.3% 854,930 1.4% 10,392,393 16.7% 17.2% 287,375 287,375 - - 300,000 $20.57
B 1,868 68,505,800 12,254,926 17.9% 591,589 18.8% 12,846,515 18.8% 18.5% (176,911) (176,911) - - 31,104 $15.91
C 715 14,453,594 2,721,269 18.8% 11,528 18.9% 2,732,797 18.9% 18.7% (31,434) (31,434) - - - $13.76
Total 2,914 145,140,496 24,513,658 16.9% 1,458,047 1.0% 25,971,705 17.9% 17.9% 79,030 79,030 - - 331,104 $17.01

ATLANTA MARKET GRAND TOTAL


A 447 106,015,225 17,955,942 16.9% 1,791,945 1.7% 19,747,887 18.6% 19.4% 793,855 793,855 - - 300,000 $22.14
B 2,096 88,522,871 15,222,734 17.2% 646,187 0.7% 15,868,921 17.9% 17.0% (861,251) (861,251) - - 31,104 $15.97
C 865 19,681,497 3,581,664 18.2% 22,952 0.1% 3,604,616 18.3% 17.9% (85,767) (85,767) - - - $14.04
Total 3,408 214,219,593 36,760,340 17.2% 2,461,084 1.1% 39,221,424 18.3% 18.2% (153,163) (153,163) - - 331,104 $19.22

QUARTERLY COMPARISONS AND TOTALS


QUARTERLY COMPARISON AND TOTALS
Q1-11 3,408 214,219,593 36,760,340 17.2% 2,461,084 1.1% 39,221,424 18.3% 18.2% (153,163) (153,163) - - 331,104 $19.22
Q4-10 3,408 214,219,593 36,366,517 17.0% 2,701,744 1.3% 39,068,261 18.2% 18.3% 187,773 443,406 92,006 2,061,330 286,460 $19.18
Q3-10 3,406 214,127,587 36,322,517 17.0% 2,841,511 1.3% 39,164,028 18.3% 18.2% (170,439) 255,633 - 1,969,324 408,656 $19.42
Q2-10 3,406 214,127,587 36,192,539 16.9% 2,801,050 1.3% 38,993,589 18.2% 18.4% 320,095 426,072 17,700 1,969,324 108,656 $19.56
Q1-10 3,405 214,109,887 36,219,724 16.9% 3,076,260 1.4% 39,295,984 18.4% 17.7% 105,977 105,977 1,951,624 1,951,324 126,356 $19.69

NOTE: STATISTICAL SET CONSISTS OF OFFICE PROPERTIES 10,000 SF AND UP, INCLUDING OWNER-OCCUPIED SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH
PROPERTIES; AND EXCLUDING MEDICAL OFFICE AND PROPERTIES WHERE THE GOVERNMENT IS 100% OWNER AND
OCCUPIER. WHILE COSTAR ATTEMPTS TO PROVIDE THE MOST ACCURATE DATA AT THE END OF EVERY QUARTER,
REVISIONS ARE MADE THROUGHOUT THE YEAR ACCOUNTING FOR DISCREPANCIES IN PAST REPORTING.

COLLIERS INTERNATIONAL | P. 3
MARKET REPORT | Q1 2011 | OFFICE | ATLANTA

CONSTRUCTION
• Office construction activity in Atlanta is limited
to just three buildings. Cox Communications’
• The market remains highly competitive for
deals. Concessions from landlords continue to
480 offices in
300,000 SF office is the largest building be aggressive; most notably for the fewer large 61 countries on
currently in development. This is the first deals prospecting the market.
phase of a 600,000 SF build-to-suit. 6 continents
INVESTMENT & SALES ACTIVITY
United States: 135
RENTAL RATES & CONCESSIONS • Investment activity continues to improve for Canada: 39
• The overall average rental rate for office is up Atlanta office. 3344 Peachtree recently sold for Latin America: 17
slightly in the first quarter to $19.22/sf. This is $345/sf which is reminiscent of ‘06 & ‘07 levels. Asia Pacific: 194
EMEA: 95
certainly nothing to represent a trend; however, • Loan defaults, however, still plague the market.
it reinforces the suggestion rents have 55 Allen Plaza recently sold on the courthouse • $2 billion in annual revenue
stabilized. steps for what turned out to be a large discount • Over 2 billion square feet under
from the previous mortgage. management
• Over 15,000 professionals
CONSTRUCTION ACTIVITY (100,000 SF+)

PROPERTY ADDRESS SUBMARKET SIZE (SF) DELIVERY DATE UNITED STATES:


6205 Peachtree Dunwoody Rd. - 1 Central Perimeter 300,000 Third Quarter 2011 Atlanta
Mike Spears SIOR
Senior VP | Colliers Manager
Two Midtown Plaza | Suite 1100
Canton 1349 West Peachtree Street, NE
GAINESVILLE
Atlanta, Georgia, 30309
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thereof. Colliers International-Atlanta, Inc., and certain
of its subsidiaries, is an independently owned and
operated business and a member firm of Colliers
International Property Consultants, an affiliation of
independent companies with over 480 offices throughout
more than 61 countries worldwide.

Accelerating success.

www.colliers.com/atlanta