ATLANTA—Over the last 12 months, corporate expansion in the Atlanta area has converged with limited construction, dropping vacancy to its lowest point since the recession. So says Marcus & Millichap's third quarter office report.

As an example, the firm pointed to State Farm's 900,000-square-foot lease in the Central Perimeter, which contributed to last year's 2.3 million square feet of absorption. This fall, Carter's, Inc. will move from more than 100,000 square feet at Midtown's Proscenium Building North to nearly 200,000 square feet in the 20-story Phipps Tower in Buckhead.

“Of particular importance is the absorption of new space appears to be correlated to Atlanta becoming a strong IT hub in the southeast,” the firm reports. “Coca-Cola signed a 275,000-square-foot lease in the SunTrust Plaza building in downtown, where it plans to add 2,000 jobs with the launch of its Information Technology Center of Excellence. … Other companies expanding information technology operations in the region include GM and AT&T, boosting the metro's IT hub stature.”

M&M predicts continued expansion by companies in the area and a bright economic outlook throughout the Atlanta metro will likely draw additional investors to the metro this year, increasing transaction activity in the office market through the remainder of 2013. Private investors and owner/users are most active in the suburbs, the report indicates, with many using cash or SBA financing to acquire properties.

“With pricing well below pre-recession levels, many private investors are also scouring the areas of Midtown and Buckhead for redevelopment opportunities as the chance to ride the broader recovery pulls them from the sidelines. Properties near major roadways or MARTA stations will garner the most attention,” M&M says. “Institutional-grade buyers are seeking best-in-class assets in key employment districts, such as Midtown, Buckhead, and the Central Perimeter, with the presence of either a single-credit tenant or multiple tenants secured under long-term leases. These assets typically trade in the mid-6 to low-7% range, depending on quality of tenancy.”

On the construction front, M&M reports that office developers will complete approximately 900,000 square feet of office space in the Atlanta metro this year, expanding inventory by just 0.4%. Completions for the year will be less than half of the previous five-year average, and down from the 1 million square feet completed in 2012. Office vacancy-wise, M&M predicts it will fall the 18.9% by year-end, down 70 basis points from the end of 2012. Vacancy declined 70 basis points last year. Strong rent growth will continue through the year and rents will reach $19.60 per square foot by the end of 2013, a 3.6% increase from last year. Average asking rents increased 0.7 percent in 2012.