The vacancy rate, however, is expected to improve by year end to 19%, down from 19.5% in 2003. However, rents generally will remain stable, according to the report prepared by Marcus & Millichap senior market analyst Jason R. Wong.
Rent concessions continue to be rampant but Wong expects owners of class B and C properties under 10,000 sf to ease concessions over the next year. But owners of class A buildings with large blocks of available space will continue to offer concessions of free rent or generous tenant improvement allowances.
"Recent corporate consolidations in the area have left many owners searching for major tenants," Wong says. "For example, owners of large office complexes in the northern submarkets, such as North Central/I-285/GA400, will have to contend with national and international corporate tenants wielding pricing power for another year."
On the rent scene, Wong says the region-wide average rent has not declined further "in spite of the rash of major office consolidations over the past year." His research shows average asking class A rent this year is $20 per sf but the effective rent is about $16.50 per sf, the same as last year.
In 2002, average asking base rent was $20.50 per sf; the effective rent, after concessions, $17. The picture in 2001 and 2000 was about the same. Average asking rent in 2001 and 2000 was $21 per sf. But the effective rents, after factoring in concessions and tenant improvements, were about $18 per sf in 2001 and $19 in 2000.
"Many owners have been able to hold the line on concessions, as office demand has started to show signs of strengthening," Wong says. "After three consecutive years of decline, asking rents will be flat this year at $19.94 per sf. Effective rents are also forecast to remain constant through year end, at $16.46 per sf.
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