"A significant economic downturn in the Atlanta office market" is how company president and broker Richard E. Bowers characterizes the first-half performance. But he believes "the worst of the office market downturn has already occurred."

He expects improvement by year end in product deliveries and absorption despite 4.5 million sf of sublease space dumped on the market, largely by the high-tech sector.

Bowers anticipates the overall average rental rate will reach $22 per sf and occupancy rates will remain relatively stable at 90% to 90.5% by the end of the fourth quarter.

But for investors seeking the next commercial hot spots, the broker recommends the relatively small 2.6 million-sf Airport/South submarket to blossom based on his own feeling that greater Atlanta's population of 4.1 million residents will balloon to five million in 10 years.

"Growth projections over the next 10 years will continue to alter Atlanta significantly, including greater densification along the Urban Corridor and our two major suburban markets, Interstate 75/Interstate 285 and Interstate 285/GA-400," Bowers says.

He also sees "significant development occurring on the south side of Atlanta, dramatically altering the Airport/South submarket."

Airport/South has 546,325 sf of vacant product; an occupancy rate of 79%; net absorption of 34,248 sf; and average asking rents of $16.49 per sf.

The 18 million-sf I-75/I-285 submarket--second largest after I-285/GA-400-- has 1.36 million sf of vacant space; occupancy of 92.4%; net absorption of 147,190 sf; and average rents of $21.18 per sf.

The 21.9 million-sf I-285/GA-400 submarket has 1.87 million sf of rentable product; occupancy of 91.5%; net absorption of 21,961 sf; and average rent of $22.65 per sf, the highest in the suburbs.

Overall net absorption of 1.07 million sf in the first half is down from 4.43 million sf in the same period a year ago. Year-to-date new construction has dropped the occupancy level to 90.3% from 91.7% at year end 2000. The 9.7% vacancy mark is the highest since it reached 10.7% in fourth quarter 1999.

Average asking rents of $21.64 per sf are up from $20.99 in 2000. New construction of 2.59 million sf tops the 2.19 million sf delivered in second half 2000.

Among the submarkets, the Urban Corridor encompassing Downtown, Midtown and Buckhead/Lenox is relatively stable at 93.2% occupancy with average rental rates increasing to $24.32 per sf versus 94.2% occupancy last year and average rents at $23.93 per sf.

The average asking rent of $26.48 per sf in the 11 million-sf, 95.2%-occupied Buckhead/Lenox market is the highest of 17 submarkets monitored by Richard Bowers & Co.