The Atlanta Commercial Board of REALTORS Releases Q3 Office Market Statistics
Wednesday, October 18th, 2017
The Atlanta Commercial Board of REALTORS, the largest commercial REALTOR association in the country, released its Q3 2017 Office Brief on office market trend statistics for 30 Atlanta Office Sub Markets. Office Brief is compiled by data from Xceligent, a leading provider of verified commercial real estate information.
"The Atlanta office market has had healthy progress this year, albeit with relatively tepid demand," said F. Keene Miller, 2017 ACBR Board President, and President of Brokerage for Ackerman & Co. "As expected, office absorption has stayed steady, although at numbers lower than this quarter last year. The indicators remain positive despite the vacancy rate remaining relatively unchanged, since 1.6 million square feet of new office space have come online this year. This increase in office inventory is a positive forward-looking indicator of industry sentiment."
LABOR: According to the Bureau of Labor Statistics, the unemployment rate decreased 0.7 percentage points from 5.3% in August 2016 to 4.6% in August 2017. The unemployment rate was lower than Georgia (4.7%) and higher than the US (4.4%). The Atlanta metropolitan statistical area nonfarm job creation totaled 86,400 in the Atlanta-Sandy Springs-Roswell metropolitan statistical area over the past year. Office using jobs (information, professional and business services and financial activities) added 43,700 jobs during the past year.
ABSORPTION: Absorption rebounded during the second and third quarters of 2017. Overall absorption totaled 355,595 sf during third quarter 2017 and 661,523 sf year-to-date. Major occupancies by Synovous, TPA Group, RaceTrac, Delta Community Credit Union, Equifax, CGS (Computer Generated Systems), CRB Engineers, Nth Degree and Amazon brought absorption into positive territory through the first nine months of 2017. As the Class A vacancy rate continues to decrease, demand for space in Class B buildings is expected to increase. Currently, only eight existing Class A buildings can accommodate a user larger than 100,000 sf. Demand for space is expected to continue as corporations continue to find Atlanta a good match for their Southeast destination.
VACANCY: Due to speculative construction completions, the total vacancy rate has increased from 16.9% in 3Q 2016 to 17.2% at the close of third quarter 2017. Direct vacancy rates increased 0.2 percentage points from 16.1% to 16.3 during the same time period. Three Alliance, Riverwood 200, 8000 Avalon and 3400 Overton completed construction totaling over 1.2 msf. The speculative completions added over 800,000 sf of vacant space. Vacancy will decrease once the tenants that have leased space occupy in the next six to twelve months. The four buildings added much needed available space to highly sought after submarkets.
RENT: Weighted average rent growth continued to improve during 3Q 2017 especially in Class A properties in Buckhead, Midtown and Central Perimeter. Weighted average asking rents in all classes rose 4.8% recording $23.76 per square foot (psf) at the close of 3Q 2017 compared to 3Q 2016. Class A weighted average rents recorded $26.71 psf at the close of 3Q 2017. We expect rents to continue increasing during 2017 with higher escalations in Class A buildings in submarkets with low vacancy and construction activity. Class B weighted average rents are expected to follow suit as options in Class A buildings drop.