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Subleases Decimate Office Market

ATLANTA-Negative absorption exceeds 500,000 square feet in the first quarter; vacancy passes 17%.

By Carl Cronan | Updated on March 31, 2009

ATLANTA-The local office sector, normally a bright spot on the national map, is now experiencing many of the same troubles as other major metropolitan areas across the US. Cushman & Wakefield recorded 523,680 square feet of negative overall absorption in this year’s first quarter, giving back most of the nearly 825,000 square feet of positive absorption posted throughout 2008.

Losses in occupancy mainly occurred in the Central Perimeter, Northwest Atlanta and Georgia 400 submarkets, continuing a trend of softening demand that started in last year’s fourth quarter. The past quarter’s losses resulted primarily from an increase in sublease space, which reached its highest level since 2004 at nearly 2.5 million square feet, according to Chris Shaner, senior research associate at Cushman & Wakefield of Georgia Inc.

As a result, Atlanta’s overall vacancy ended the first quarter at 17.3%, up slightly from the end of 2008. Average asking rents declined slightly to $21.25 per square foot, yet remained above historical lows for the market, Shaner says.

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