RICHARD BOWERS CO. The Bowers Digest
RICHARD BOWERS & CO.
The Bowers Digest
Metro Atlanta Office Market Analysis
Vol. 25, No. 2
Downtown leads all submarkets in vacant space
Urban
Suburban
Nine straight quarters of increased rental rates
¡°Second quarter 2014
continues an ongoing
positive trend... our
ninth straight quarter of
positive absorption.¡±
Suburban occupancy rate back over 83 percent
Real Estate Trends
Mid-Year 2014
Providing self generated and proprietary office market data since 1989
RICHARD BOWERS & CO.
In Brief: The Atlanta Market
The Atlanta Office Market absorption is continuing in a positive
direction for second quarter 2014 with 580,188 square feet
positive absorption. In addition to positive absorption, Atlanta
is having an ongoing vacancy reduction with properties taken
out of circulation this quarter, to include the 250 Piedmont
Office Tower, the former SunTrust Operations Center
containing 350,000 square feet being converted to apartments,
230 Peachtree with approximately 50% of the building being
converted to a boutique hotel of approximately 125,000 square
feet, and the Flatiron Building containing 42,000 square feet
being converted to a high tech incubator facility by Scoutmob.
Vacancy rates are down to 16.74%, the lowest since First
Quarter 2009. Despite the improved office market and higher
occupancy rates, rental rates remain relatively stable in the
$21.55 range on average, reflecting ongoing favorable leasing
opportunities for space users except in several major Class
A submarkets; Buckhead, Midtown, and GA-400/I-285.
The leading submarkets in second quarter absorption were GA-400
North (253,182 square feet), I-285/GA-400 (200,948 square feet),
Midtown (129,928 square feet), I-75/I-285 (73,487 square feet) ,and
Buckhead/Lenox (36,929 square feet). The suburban markets are
significantly outperforming
the urban markets although
Market
the urban markets are at
significantly higher average
rates, at $24.39 per square
foot compared to $21.50 per
square foot for the suburbs.
The submarkets with the
highest occupancy levels
are NE Expressway-South at
91.19%, Decatur at 90.62%,
I-285/GA-400 at 86.4%, GA400 North at 86.25%, and
Buckhead/Lenox at 86%.
Infrastructure:
There are a number of
significant
infrastructural
improvements
underway
in Atlanta to include the
recent completion of on and
off ramps at I-85 onto GA400, the ongoing airport
road improvements at Camp
Creek Parkway, and the
continuing
development
along the Atlanta BeltLine, considered Atlanta¡¯s number one
infrastructural development and perhaps the country according
to some city planners. The BeltLine has resulted in major inmigration with people living near the BeltLine on both the
Eastside in Virginia Highlands and Inman Park and the Westside
in West Midtown, whose locations are only approximately 1.5
miles from the Downtown/Midtown Peachtree Street Corridor.
Other infrastructural improvements or planned include the
new GA-400/I-285 one billion dollar Interchange, which will
commence construction in 2015 and is scheduled for completion
in 2016. There is also roadwork and additional expressway
ramps planned at the I-75/I-285 Interchange for the new Atlanta
Braves Stadium relocation to Cobb Parkway. Clayton County
is voting in November to determine whether or not the county
will enter the MARTA transit system and pay a one cent sales
tax for bus and rail transit. The current expectation is for the
referendum and sales tax to be approved, which will add a third
county to the MARTA system, now serving Fulton and Dekalb.
Downtown¡¯s 2.1 miles Atlanta Streetcar is scheduled to open in
November. This streetcar, which has the ability to be expanded,
will serve the Auburn/Edgewood Avenue Historic District running
west to Centennial Olympic Park serving the surrounding venues
to include two major venues opening this year, the recently
completed National Civil Rights Museum and the College
Football Hall of Fame, which is scheduled to open in August.
TWO
Other major venues include the Downtown Atlanta Falcons
Stadium scheduled to open in 2019 and the new Braves Stadium.
Other improvements include the possibility of a second airport in
Paulding County and increased biking activity through the bike
lanes opened on John Portman Boulevard and elsewhere extending
out to the BeltLine. Numerous Downtown workers are already
utilizing bicycle transportation for their work commutes currently.
Outlook:
The outlook for the second half 2014 is positive with a potential surge
in activity due to a number of tenants taking occupancy at Ponce
City Market and a number of significant leases under negotiation to
include potential and significant relocations to Atlanta including the
Pulte Group Corporate Headquarters and others. Atlanta is poised
to continue a positive recovery with the opening of Buckhead
Atlanta, and their 80,000 square foot office building at 100% leased
to Spanx. With limited new office developments in the planning
stages or under construction, and increasing demand, occupancy
rates will continue to improve and rental rates will start increasing.
The demand for new office space is also commencing. Tishman
Speyer will be breaking ground in August 2014 on a thirty story,
500,000 square foot office
tower at Lenox Road,
Overview
scheduled for delivery
in mid 2016. The asking
rental rate for this new
development will be the
highest in Atlanta at $38
per rentable square foot and
at a projected construction
cost of $375 per square foot.
Both the urban corridor,
with the ongoing inmigration by Millennials
and empty nesters desiring
to locate in an urban and
pedestrian
environment
with public transportation,
and the major suburban
submarkets on the north
side, including the I-285/
GA-400 market with State
Farm¡¯s major campus and
other potential mixed use
developments,
GA-400
North and I-75/I-285, will
continue to grow.
Our Central Business District is continuing to gain strength and
favorable consideration by numerous users due to the many
infrastructural improvements and ongoing developments taking
place to include the National Civil Rights Museum and the College
Football Hall of Fame, the opening of the Atlanta Streetcar, the new
Atlanta Falcons Stadium, the landscaping upgrades at Woodruff
and Centennial Olympic Park and various other developments
to include the construction of the 200,000 square foot law
school at Georgia State University, the Ambling student housing
development at Courtland and John Wesley Dobbs, the proposed
Post Properties development in Centennial Hill, the opening of
the renovated Aloft Hotel on Baker Street, and the new Hyatt
House at Ivan Allen Boulevard and Luckie Street among others.
Although, Atlanta has not rebounded as quickly as other major
cities around the country, Atlanta is poised for a significant
economic surge due to a low cost of living, favorable taxes,
a pro-business environment, a highly educated workforce,
a mild climate, affordable office rates and housing, and the
advantages of the world¡¯s busiest airport, Hartsfield-Jackson
International Airport. With these advantages and strong
economic activity, rental rates will be increasing and occupancy
is projected to be in the 84 - 85% range by year end 2014.
RICHARD
BOWERS
RICHARD
BOWERS
&&
CO.CO.
The Atlanta Office Market
2nd Quarter 2014
2nd Quarter 2013
Mid-Year Absorption
580,188
594,702
2nd Quarter Absorption
508,614
404,353
Total Existing Square Feet
134,104,122
135,221,299
Total Available Square Feet
22,447,651
24,678,082
16.74%
18.25%
$21.55
$21.24
Space Delivered YTD - Square Feet*
3,855
0
Percent Of Total Space Vacant
Average Quoted Rental Rate
* Excludes Net Losses
Urban Corridor Submarkets
1. Downtown
2. Midtown
3. Buckhead/Lenox
Suburban Submarkets
4. Airport/South
5. Decatur
6. GA-400 North
7. I-20W/Greenbriar
8. I-285E/Stone Mountain
9. I-285/GA-400
10. I-285/I-85/Northlake
11. I-75 Corridor
12. I-75N/Marietta/Johnson Ferry
13. I-75/I-285
14. NE Expressway-North
15. NE Expressway-South
16. Peachtree Corners
Atlanta¡¯s Top Five Ranking Submarkets
Absorption - 2nd Quarter 2014:
GA-400 North
253,182
I-285/GA-400
200,948
Midtown
129,928
I-75/I=285
73,487
Buckhead/Lenox
36,929
Total Available Square Feet:
Downtown
3,203,734
I-285/GA-400
3,088,849
I-75/I-285
3,043,426
Midtown
2,735,948
GA-400 North
2,177,496
Total Existing Square Feet:
I-285/GA-400
22,705,938
I-75/I-285
18,587,264
Downtown
16,068,416
GA-400 North
15,838,963
Buckhead/Lenox
15,204,451
Average Quoted Rental Rate:
Buckhead/Lenox
$26.90
Midtown
$25.55
I-285/GA-400
$22.96
Downtown
$21.28
I-75/I-285
$20.62
Submarket Occupancy Rate:
NE Expressway-South
91.19%
Decatur
90.62%
I-285/GA-400
86.40%
GA-400 North
86.25%
Buckhead/Lenox
86.00%
Average Class ¡°A¡± Rental Rate:
Buckhead/Lenox
$29.14
Midtown
$27.90
I-285/GA-400
$24.98
Decatur
$23.47
Downtown
$23.21
¡°This is the highest occupancy rate Atlanta has seen in five years and the
highest average rental rate since third quarter 2010¡±
The Bowers Digest was prepared by the Research Department & Assistants of Richard Bowers & Co. The numerical data summarized
herein were obtained directly from the owners and managers of the buildings included in the Richard Bowers & Co. database. Richard
Bowers & Co. takes no responsibility for the accuracy of the information provided by others. Additional copies are available at $25.00 each.
Copyright ? 2013 by Richard Bowers & Co., Atlanta, Georgia. All rights reserved.
THREE
RICHARD BOWERS & CO.
Atlanta Market Trends By Quarter
Quarter
Total
Sq. Ft.
Vacant
Sq. Ft.
Net Absorption
Vacancy
Rate
Delivered Delivered
Qtr:
Ytd
4 Qtr
Total
Year
To Date
Quarter
Average
Rental Rate
2Q2014
1Q2014
134,104,122 22,447,651
134,100,267 22,925,410
16.74%
17.13%
3,855
(363,042)
(359,187)
0
1,558,762
1,454,501
733,188
71,574
508,614
71,754
$21.55
$21.50
4Q2013
3Q2013
2Q2013
1Q2013
135,405,999
135,391,218
135,221,299
135,256,002
23,833,938
24,164,309
24,678,082
25,117,138
17.60%
17.85%
18.25%
18.57%
0
0
0
0
0
0
0
0
1,897,546
1,303,584
1,003,090
1,466,308
1,897,546
1,278,394
594,702
190,349
619,152
683,692
404,353
190,349
$21.50
$21.35
$21.24
$21.14
4Q2012
3Q2012
2Q2012
1Q2012
135,465,599
135,701,093
135,574,050
135,385,715
25,309,557
25,362,693
25,618,848
26,295,493
18.68%
18.69%
18.90%
19.42%
(8,835)
127,043
188,335
890
307,433
316,268
189,225
890
1,742,054
2,229,071
2,120,886
1,479,655
1,742,054
1,714,273
1,331,075
466,095
25,190
383,198
864,980
466,095
$21.03
$20.91
$20.67
$20.61
4Q2011
3Q2011
2Q2011
1Q2011
135,384,825
135,402,440
135,402,440
135,402,440
26,686,726
27,224,130
27,521,660
27,791,873
19.71%
20.11%
20.33%
20.53%
(17,615)
0
0
0
0
0
0
0
844,724
184,350
(100,857)
(874,857)
844,724
324,935
(27,405)
(242,808)
519,789
297,530
270,213
(242,808)
$20.84
$20.89
$21.01
$21.02
4Q2010
3Q2010
2Q2010
1Q2010
135,357,440
135,402,440
135,402,440
135,402,440
27,549,065
27,408,480
27,420,793
26,917,016
20.35%
20.24%
20.25%
19.88%
0
0
0
1,640,626
1,640,626
1,640,626
1,640,626
1,640,626
(626,015)
(1,040,263)
(1,364,227)
(1,566,872)
(626,015)
(485,430)
(497,743)
6,034
(140,585)
12,313
(503,777)
6,034
$21.20
$21.26
$21.39
$21.44
4Q2009
3Q2009
2Q2009
1Q2009
133,761,814
133,838,047
132,542,904
132,074,631
25,282,424
24,803,824
23,197,030
22,022,335
18.90%
18.53%
17.50%
16.67%
(76,233)
1,295,143
468,273
(168,464)
1,518,719
1,594,952
299,809
(168,464)
(1,947,045)
(1,797,220)
(1,552,421)
(796,409)
(1,947,045)
(1,392,212)
(1,080,561)
(374,139)
(554,833)
(311,651)
(706,422)
(374,139)
$21.42
$21.56
$21.61
$21.65
4Q2008
3Q2008
2Q2008
1Q2008
132,243,095
131,664,332
131,747,344
130,723,492
21,816,660
20,832,889
20,849,049
19,874,787
16.50%
15.82%
15.83%
15.20%
578,763
(83,012)
1,023,852
152,000
1,671,603
1,092,840
1,175,852
152,000
60,188
456,974
2,116,415
2,975,148
60,188
465,196
532,048
482,458
(405,008)
(66,852)
49,590
482,458
$21.64
$21.62
$21.65
$21.40
The Urban Corridor
The Urban Corridor, which consists of the Downtown, Midtown, and Buckhead submarkets,
experienced 143,273 square feet of positive absorption for Second Quarter 2014, bringing the MidYear absorption total to 147,102 square feet. While these in-town numbers are down from last year,
it still marks the fourteenth consecutive quarter of positive absorption for the Urban Corridor. As
a direct result of the last three and a half years of absorption, the vacancy rate has declined from
22.86 percent to 17.47 percent, a change of over 500 basis points. Due to increased occupancy
rates and the lack of new product coming to the market, rental rates have also increased 21 cents
from Mid-Year of 2013 to an average quoted rental rate of $24.38 per square foot.
Although the Buckhead/Lenox submarket had mediocre absorption of 36,929 square feet this
quarter, this submarket still leads the Urban Corridor in occupancy at 86 percent. Considering
the amount of new deliveries constructed between 2007 and 2010, which inflated the Buckhead
submarkets¡¯ vacancy to a record high 29.50 percent, this turnaround in just over four years is
remarkable. Buckhead leads the urban submarkets in four quarter cumulative absorption overall
with 156,455positive square feet. This recent activity, mixed with low vacancy rates, has improved
Buckhead¡¯s average rental rate to $26.90 per square foot, up 29 cents from last quarter and 69
cents year-over-year. Look for this submarket to continue to thrive as the ongoing in-migration of
businesses, workers, and young professionals who desire an urban pedestrian environment shows
FOUR
RICHARD BOWERS & CO.
no sign of slowing down.
Notable Lease Transactions Signed
Midtown, the smallest of the three urban submarkets with nearly
15 million square feet of existing office space, has posted positive
year-to-date absorption of 129,133 square feet. In the last three
years, the Midtown submarket has increased its occupancy rate
from 76.01 percent to 81.66 percent, a difference of 5.65 percent.
Although the last two quarters have only experienced modest
positive absorption, this submarket still has the second highest
average rental rate at $25.55 per square foot and the second
highest Class ¡°A¡± Urban Corridor rate at $27.90 per square foot.
Downtown has the lowest occupancy rate of the Urban Corridor
at 80.06 percent, but has been gaining traction recently. The
submarket currently has an average rental rate of $21.28 per
square foot and a Class ¡°A¡± rental rate at $23.21 per square foot.
While the overall occupancy is not fairing as well as the other
suburban submarkets at 80.06 percent, the Class ¡°A¡± market
is performing better with an 86.69 percent occupancy rate. As
more businesses and workers are relocating to the Downtown
office market, new attractions and developments are bringing
more tourists to the area as well. The new SkyView Ferris
Wheel, which plans to attract around 500,000 visitors each year,
was just completed, as was the National Civil Rights Museum, a
42,000 square foot museum that plans to attract 400,000 visitors
annually. Numerous other projects are well underway to include
the Atlanta Streetcar, the new College Football Hall of Fame, and
the new $1.2 billion Atlanta Falcons football stadium. Downtown
has also been one of the nation¡¯s leaders in the Better Buildings
Challenge, a nation-wide effort by the Department of Energy
to enhance building effficiency by improving ¡°green¡± programs
and policies such as water and energy conservation, reducing
solid waste and carbon emissions, and improving recycling
rates. Downtown¡¯s participation in this initiative has led to 17%
of Downtown¡¯s office square footage being ¡°Green-Rated.¡±
Lessee
AMEC
Property
1949 Lakeside Parkway
Size (SF)
111,919
Preferred Apartment The Medici ¨C 3284 Northside 68,960
Advisors
EarthLink The Proscenium 64,910
DS Waters Wildwood Center 58,357
Altisource Northpark 400 46,859
Jackson Spalding
Eleven Hundred Peachtree
35,928
Andritz Hydro 5
405 Windward Parkway
35,168
Regus One Alliance Center 26,002
Vonage The Towers at 25,038
Wildwood Plaza
¡°Urban Corridor occupancy rates have jumped
1.28% from Mid-Year 2013¡±
Office Space by Building Classification
Net Absorption
Total
Sq. Ft.
Vacant
Sq. Ft.
Vacancy
Rate
2nd
Quarter
4 Qtr
Total
Average
Rental Rate
Urban Corridor
Class A
Class B
Class C
Total
29,965,320
13,783,183
2,443,239
46,191,742
4,456,313
2,828,122
784,196
8,068,631
14.87%
20.52%
32.10%
17.47%
177,397
63,990
(98,114)
143,273
393,284
(46,869)
(83,964)
262,451
$26.99
$20.69
$15.67
$24.51
Suburban
Class A
Class B
Class C
Total
48,573,999
33,145,939
6,192,442
87,912,380
6,519,980
6,254,621
1,604,419
14,379,020
13.42%
18.87%
25.91%
16.36%
344,398
6,726
14,217
365,341
1,167,547
78,392
50,372
1,296,311
$22.56
$17.26
$14.52
$19.99
78,539,319
46,929,122
8,635,681
134,104,122
10,976,293
9,082,743
2,388,615
22,447,651
13.98%
19.35%
27.66%
16.74%
521,795
70,716
(83,897)
733,188
1,560,831
31,523
(33,592)
1,558,762
$24.25
$18.26
$14.84
$21.55
Total Market
Class A
Class B
Class C
Total
FIVE
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