Richard Bowers & Co: Q4 2007 Atlanta office market report
January 17, 2008
Q4 2007 summary – From Richard Bowers
The fourth quarter of 2007 continued favorably for the Atlanta office market, posting
positive absorption of 75,300 square feet. Urban submarkets absorbed 105,873 square feet, while the
suburbs had negative absorption of 30,573 square feet, primarily as a result of negative absorption
in two submarkets: 228,262 square feet in the I-285/GA-400 submarket and 106,797 square feet in the
I-75/I-285 submarket. Average rental rates across all Atlanta submarkets increased modestly
from $21.09 in the third quarter of 2007 to $21.15 in the fourth quarter.
With 256,805 square feet of deliveries, all of which occurred in the suburbs, average vacancy
rates increased slightly from 15.23 percent in Q3 2007 to 15.33 percent in the fourth
quarter.
2007 year-end summary – From Richard Bowers
Despite economic concerns about sub-prime lending, oil and gas price increases, and the
devaluation of the dollar, calendar year 2007 experienced 3,164,363 square feet of positive
absorption-the highest since calendar year 2000 by well over one million square feet. Over
the last year, vacancy rates have decreased from 16.43 percent in the fourth quarter of 2006 to
15.33 percent for the fourth quarter of 2007. Rental rates have moved upward significantly
from $20.56 per square foot for the fourth quarter of 2006 to $21.15 per square foot for the fourth
quarter of 2007. Although the urban corridor outperformed the suburbs in the fourth quarter
of 2007, for all of 2007 the suburbs outperformed the urban corridor with 1,900,875 square feet of
absorption compared to the urban corridor's 1,263,488 square feet.
The urban corridor, due to significantly greater square footage deliveries for 2007, has a
slightly higher vacancy rate at year-end 2007 of 15.66 percent as compared to the fourth quarter of
2006 at 15.52 percent. The suburbs' vacancy rate, however, decreased from 16.88 percent in the
fourth quarter of 2006 to 15.18 percent in the fourth quarter of 2007. The urban corridor has
significantly higher average quoted rental rates-currently at $23.65 per square foot versus $19.88
in the suburbs.
2008 Outlook – From Richard Bowers
With the current questionable economic outlook for 2008 and concerns in residential and
sub-prime lending, U.S. manufacturing, gasoline prices, and inflation, Richard Bowers & Co. is
not as bullish on 2008 despite favorable 2007 absorption results.
Nevertheless, as the fastest-growing city in the country and the number one location under
consideration for young college professionals, we fully expect the Atlanta office market to have
positive absorption in 2008 unless there is a severe economic downturn. The office
market will remain relatively stable with only 743,062 square feet of deliveries in 2008-484,000
square feet along the urban corridor, and 259,062 square feet in the suburbs. The major
development scheduled for delivery in 2008 is Buckhead's 3344 Peachtree Road at 484,000 square
feet.
Occupancy rates will in all likelihood increase by a small percentage with the limited number
of deliveries projected for 2008. Rental rates, which have been relatively stable in
comparison to other U.S. markets, are also expected to move upwards, possibly by as much as $1.00
per square foot, particularly with increased operating expenses and taxes, and new buildings
brought on stream at more expensive full service rental rates.
About Richard Bowers & Co:
Founded in 1980, Richard Bowers & Co. is Atlanta's premier local commercial real estate
firm. The firm engages in leasing and sales of office, industrial, retail, land and investment
properties. Online at www.richardbowers.com.