Office tenants are shopping around for more than 5.5 million square feet throughout Atlanta, up from 4.7 million square feet at the end of 2008, according to Jones Lang LaSalle. But less than two million square feet of leases were actually signed in the second quarter, a 6% decline from this year's first quarter.
Several significant lease transactions were reported during the past quarter, including SunTrust Bank's commitmentfor 253,000 square feet at Peachtree Center and Firethorn Holdings signing for 50,000 square feet in the new Terminus 200 building. More hope is on the horizon, with NCR Corp. announcing plans last month to relocate its headquarters to suburban Duluth from Dayton, OH.
Despite signs of economic recovery on the horizon, the Atlanta market is faced with the prospect of 1.5 million square feet of unleased new space hitting the market by the end of this year. "It may take additional time for Atlanta's real estate sector to fully recover," says Lanie Rea, Jones Lang LaSalle's research manager in Atlanta.
Besides delivery of new space, Atlanta is also facing its biggest crush of sublease space in the past five years, totaling 2.8 million square feet at this year's midpoint, according to Cushman & Wakefield. Overall vacancy reached 18% through the second quarter, with the Central Perimeter, Northwest and Downtown submarkets hit hardest by subleases attributed to corporate cutbacks. A total of 589,504 square feet of negative overall absorption was recorded through the first six months of this year, following 830,000 square feet of positive absorption in 2008.
Average asking rents decreased only slightly through the first half of 2009, to $21.32 per square foot, Cushman & Wakefield states. Buckhead and Midtown continue to command the highest rents among Atlanta's office submarkets.
Investment activity among Atlanta office buildings was practically dormant during the second quarter. The most notable major transaction was Capmark Bank's foreclosure of the Equitable Building, also known as 100 Peachtree, for $29.5 million or $47 per square foot in June. Capmark now seeks to resell the 33-story tower.
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