February 02, 2018
ATLANTA – Atlanta’s office market experienced healthy absorption and limited development during fourth quarter 2017, which led to vacancy declining to a near-cycle-low of 16.1 percent. According to Transwestern’s fourth-quarter 2017 Atlanta office market report, demand was strongest at the close of the year with 612,749 square feet absorbed during the quarter, erasing losses earlier in the year and bringing annual absorption to approximately 575,000 square feet.
“The 2017 trends show demand as clearly stronger in urban submarkets than in the suburbs and weighted toward Class A space,” said Keith Pierce, Transwestern’s Director of Research for the Southeast U.S. “We also saw greater emphasis placed this year on space efficiencies and the rise of alternative workspaces. While the year ended positively, office demand has slowed in the past two years as users reassess their needs and react to rising rents.”
Overall asking rents rose to an average of $25.05 per square foot during fourth quarter 2017, rising in every submarket except Buckhead. Average rates remain highest in Class A properties in Midtown and Buckhead, at $35.05 and $33.83 respectively, and most major submarkets continue to set new record highs each quarter for Class A properties.
At the end of 2017, Atlanta had nearly 1.9 million square feet of speculative office space under construction, 35 percent of which is preleased, in addition to another 2 million square feet of build-to-suit projects. New developments totaling 1.7 million square feet have already been completed in Buckhead, Midtown, North Fulton, and in the Northwest.
“The larger projects underway are in desirable and heavily amenitized locations, and several smaller properties are also being developed to take advantage of changing user preferences,” added Pierce. “As owners and tenants adjust to changing workplace dynamics, Atlanta remains well-positioned to attract workers and businesses over the long term.”
Additional highlights from Transwestern’s fourth-quarter Atlanta office report include:
· Atlanta enjoyed a healthy economy in 2017 that continues to outperform the nation. The market’s unemployment rate is at its lowest point in a decade, at 4.1 percent.
· Among Atlanta’s major submarkets, overall rates are lowest in Midtown (10.7 percent) and North Fulton (14.3 percent), while the lowest Class A vacancy rates are found in Midtown and the smaller Northlake submarket.
· In 2017, Northwest and Midtown saw the highest levels of absorption.
· Although sales volume slowed in 2017 compared to 2016, the average investment sale price increased 8 percent to $179 per square foot by the end of the year.
Download the full report at: https://tinyurl.com/transwestern-atl-4Q17office.
Transwestern is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service – the Transwestern Experience. Specializing in Agency Leasing, Tenant Advisory, Capital Markets, Asset Services and Research, our fully integrated global enterprise adds value for investors, owners and occupiers of all commercial property types. We leverage market insights and operational expertise from members of the Transwestern family of companies specializing in development, real estate investment management and research. Based in Houston, Transwestern has 35 U.S. offices and assists clients through more than 180 offices in 37 countries as part of a strategic alliance with BNP Paribas Real Estate. Experience Extraordinary at transwestern.com and @Transwestern. For updates from the Southeast region, follow @TranswesternSE.