ATLANTA—Continued growth. Record-breaking overall rental rates. That's the story behind Cushman & Wakefield's second quarter 2017 statistics for the Atlanta office market.
Buckhead, Atlanta's leading office market, reached class A rents of $34.63 per square foot. This marks the first time in Atlanta's history class A office rates have eclipsed $34 per square foot.
“Atlanta's unprecedented rent growth is being driven by an incredible combination of macro and micro economic forces,” Lawrence Gellerstedt, director of Cushman & Wakefield Atlanta's Office Tenant Representation Group, tells GlobeSt.com. “From a macro level, financing for new construction projects other than multifamily has been restrained in this cycle.”
During the second quarter of 2017, overall average office rents eclipsed last quarter's record of $23.51 per square foot. That translates to a new record of $24.10 per square foot, an increase of $0.59 per square foot. (Is this Atlanta's biggest office market challenge right now?)
What's more, overall office space net absorption rebounded in the second quarter from last quarter's negative absorption, with 405,038 square feet of positive net absorption. The Northwest office submarket experienced 210,124 square feet of positive net absorption, followed by Midtown with 153,167 square feet absorbed. (Is this a model for office space of the future?)
“Pricing in other traditionally top tier markets like New York and San Francisco for office space, residential and just general cost of living has outpaced people's ability and willingness to pay,” Gellerstedt says. “That trend has also accelerated mass migration of young talented workers, when that demographic is a critical need for most companies, to higher quality of life cities like Austin, Nashville and Atlanta.”
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