In 10th straight quarter of positive absorption, urban corridor solidly outperforms suburbs

October 9, 2008

During the third quarter of 2008, the Atlanta office market showed slight improvements over mid-year 2008 with positive net absorption of 38,287 square feet. Total absorption for 2008 now measures 1,042,130 square feet, down nearly two-thirds from the same quarter last year.
 
The urban corridor (Downtown, Midtown and Buckhead/Lenox) solidly outperformed the suburbs in the third quarter with 220,721 square feet of positive absorption, while the suburban submarkets experienced negative absorption of 182,434 square feet. Rental rates along the urban corridor are still $4.01 per square foot higher than the suburbs at average rates of $24.32 and $20.31, respectively. The urban corridor also enjoys a higher occupancy rate at 85.15 percent than the suburbs at 84.57 percent.
 
"Our ongoing urban renaissance and public transportation objectives clearly favor the urban corridor," said Richard Bowers, president and CEO of Richard Bowers & Co. "There is also a groundswell in the interest of new investment in alternative public transportation to serve Atlanta's commuters and offset our commuting difficulties, particularly with short-term fuel shortages and longer-term prices exceeding $4.00 per gallon. We are thrilled with the positive news about commuter rail in the Athens-Atlanta-Macon corridor, particularly Griffin-to-Atlanta, and the Downtown Multimodal Passenger Terminal."

The Midtown submarket led net absorption gains for the quarter with 168,675 square feet, followed by the Airport/South (80,363 square feet), NE Expressway-South (53,509 square feet), Downtown (37,833 square feet), and the I-75 Corridor (34,405 square feet).

Average rental rates throughout Atlanta decreased slightly during the third quarter from $21.69 per square foot to $21.65 per square foot.
 
"Atlanta is fortunate to be home to many strong companies, corporate headquarters, and the world's busiest airport," Bowers said. "Additionally, the city is fortunate that we are not delivering a lot of new space. In fact, for the third quarter of 2008 there were no new deliveries.  For the remainder of the year only three smaller buildings are being delivered, all in the suburbs, totaling 378,557 square feet: Stonebridge III in the GA-400 North submarket, Suwanee Gateway I in the NE Expressway-North submarket, and the Da Vinci building in Peachtree Corners."
 
With a stronger fourth quarter, Bowers believes 500,000 square feet of additional positive absorption is possible, though the market will miss the 2,500,000 projection for the year by a wide margin

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