"The statistics are actually better than we expected," Lanie Rea, research manager of JLL's Atlanta office, tells GlobeSt.com. "We're not in as bad a position as we could be, and definitely not as bad as other metropolitan markets across the country."
Atlanta's area wide office vacancy ended 2008 at 19.5% overall, 17% direct, with close to 1.6 million square feet of new space added through the fourth quarter and 3.5 million square feet under construction, mostly in urban areas, JLL statistics show. Yet despite rising vacancy, Rea says asking rents remained relatively stable over the past year, at $21.71 per square foot.
Atlanta's central business district—including the Downtown, Buckhead and Midtown submarkets—posted positive net absorption of 138,000 square feet over the past year. Overall vacancy ended the year at 17.6%, with 8.2 million square feet of availability. Asking rents for class A space nearly reached $25 per square foot, with overall CBD rents at $23.78, according to JLL.
"Leasing activity was so strong in the urban markets for so long, and it's still being reflected in the numbers," Rea says, adding that the momentum is expected to carry over into 2009. Gains in health care, services, technology and education are viewed as overcoming any fallout from financial services, she says.
Meanwhile, office vacancy in the suburbs was well beyond the 20% mark at the end of the year, with the Central Perimeter submarket being the only exception at 18.5%. Negative suburban absorption totaled nearly 1.3 million square feet in 2008, with just under 1.1 million square feet of new space opening throughout the year, based on JLL figures.
Other local office brokers express optimism for the Atlanta market in the coming year, given anticipated improvement to the economy as well as infrastructure, and given the city's standing as a major growth market. However, a point of concern is that annual average absorption during the current decade has been less than half what it was in the 1990s, when it exceeded 3.2 million square feet per year.
"We believe 2009 will be a significant improvement over 2008 with the urban corridor continuing to perform well, a modest rise in rental rates and vacancy rates decreasing to below 15%," Richard Bowers, an independent broker affiliated with TCN Worldwide, stated in a research report. He noted that new space deliveries will be limited to two million square feet in Atlanta's urban corridor, plus 181,000 square feet on the suburban south side.
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