Pershing Park Plaza
ATLANTA—After experiencing a slow start to the year, Atlanta's office leasing market has followed with two strong quarters of positive direct net absorption. Absorption gains for the third
quarter totaled 457,655 square feet, a respectable follow-up to the 488,418 square feet gained in the second quarter, according to PM Realty Group.
As a result, the firm reports, the year-to-date direct net absorption tally reached 1,021,213 square feet through the third quarter, sustaining a relatively strong trend of positive absorption and signaling healthy leasing market fundamentals. Class A product accounted for the majority of the quarterly demand with 461,706 square feet of of direct absorption growth, increasing its year-to-date total to 810,815 square feet.
GlobeSt.com caught up with Bill Weghorst, executive vice president and managing director of the Southeast division of PM Realty Group, to get his thoughts on the state of the office development market. He also addresses the spec construction issue in part two of this exclusive interview. You can still read part one: Atlanta Office Market: Room for Rent Growth?
GlobeSt.com: How would you describe the state of office development in Atlanta?
Weghorst: During this current real estate cycle, new office development, for the most part has driven by pre-commitments from large corporate users. We have seen fewer speculative office development than we have in previous real estate cycles.
A big reason for the limited amount of spec construction is due to stricter lending requirements and record construction costs. The supply of new office space in the current cycle has been very temperate with only 1.9 million square feet delivered in the past give years. This pales in comparison to the 12.6 million square feet of new construction delivered between 2004 and 2008.
GlobeSt.com: How will the 2017 Atlanta office market compare to 2016?
Weghorst: We expect the 2017 Atlanta office market activity to be very similar to what we have seen in 2016. We will continue to see healthy job growth and a limited amount of new office space delivered which should be absorbed fairly quickly. Rental rates should continue to grow in 2017, even if slightly below 2016's growth pace, but still significantly faster than our historical average.
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