In previous commercial real estate cycles Atlanta was used to seeing occupancy levels drop significantly after new construction came on-line, Weghorst points out. If you look at everything currently under construction across Atlanta, there are only six projects over 200,000 square feet—and three of them are build-to-suits.

What's more, he notes, the largest spec building, Coda, doesn't deliver until 2019, but is already 60% pre-leased. As Weghorst sees it, this shows that new office space supply is in pace with demand and we will keep seeing strong positive absorption and occupancy levels rise for the foreseeable future.

“Another sign that we are not over-building is that we are seeing strong absorption growth in the class B sector,” Weghorst says. “In previous real estate cycles, when a large amount of new construction came on-line, class B occupancy rates dropped. With a limited amount of new construction, landlords are not having to offer lucrative concession packages which historically pulled tenants out of existing office product.”

(Technology is playing an ever-increasing role in commercial real estate. Get one guru's take.)

ATLANTA—The Atlanta metro area's office market witnessed a significant improvement over modest gains achieved in the previous quarter, posting 537,708 square feet of direct net absorption during the second quarter. That's according to PMRG's second quarter office report.

During the second quarter, class A office product recorded occupancy gains totaling 362,072 square feet, a significant increase from the previous quarter's negative absorption. Class A direct office occupancy witnessed a decline for the second quarter in a row, sliding by 80 basis points to 85.3%. However, PMRG reports, quarterly decline in class A direct office occupancy levels largely resulted from new supply outstripping demand with nearly 1.3 million square feet of office space coming online.

By contrast, class B direct office occupancy continued its positive climb with an increase of 70 basis points during the quarter to settle at 83.2%, exactly 70 basis points higher than its mid-year 2016 mark. And asking rental rates continued to rise as new deliveries coupled with strong leasing demand for quality office space helped push rents to new highs during the quarter.

“Atlanta's office market rebounded from a flat first quarter to post a strong 537,708 square feet of direct absorption in the second quarter of 2017,” Bill Weghorst, president of PMRG's eastern division, tells GlobeSt.com. “One of the biggest indicators to the health of the Atlanta office market is the fact that we delivered 1.3 million square feet of new office in the second quarter and occupancy levels remained relatively flat.

In previous commercial real estate cycles Atlanta was used to seeing occupancy levels drop significantly after new construction came on-line, Weghorst points out. If you look at everything currently under construction across Atlanta, there are only six projects over 200,000 square feet—and three of them are build-to-suits.

What's more, he notes, the largest spec building, Coda, doesn't deliver until 2019, but is already 60% pre-leased. As Weghorst sees it, this shows that new office space supply is in pace with demand and we will keep seeing strong positive absorption and occupancy levels rise for the foreseeable future.

“Another sign that we are not over-building is that we are seeing strong absorption growth in the class B sector,” Weghorst says. “In previous real estate cycles, when a large amount of new construction came on-line, class B occupancy rates dropped. With a limited amount of new construction, landlords are not having to offer lucrative concession packages which historically pulled tenants out of existing office product.”

(Technology is playing an ever-increasing role in commercial real estate. Get one guru's take.)