Cushman & Wakefield today released third-quarter 2015 statistics for the Atlanta office market that show it continued to improve as strong occupancy gains translated into a one percentage point decrease in vacancy since 2014 year-end, ending the quarter at 16.8 percent, the lowest vacancy rate the market has seen since the fourth quarter of 2008.

C&W Research revealed the market continued to capture consistently healthy absorption during the third quarter, totaling 578,212 square feet. The Atlanta market has seen 15 consecutive quarters of net-occupancy gains continuing to drive Atlanta’s vacancy downward toward pre-recession levels.

The NW/Cumberland/Galleria submarket captured many of the market’s largest new lease deals during the third quarter. These deals included: Lincoln Financial’s 162,000-square-foot lease at Riveredge Summit, United Healthcare’s 127,000 –square-foot lease at 2100 Riveredge Parkway, and Delta Community Credit Union’s 79,000-square-foot lease at Riverwood 200.

Averaging $22.27 per square foot as of the end of the third quarter, overall average asking rents continued their surge in the Atlanta area increasing 5.0 percent from one year ago marking the largest year-over-year growth since 2008. Notably, overall class A asking rents increased at a more rapid pace, up 6.8 percent year-to-date to an average of $25.92 per square foot, as Atlanta’s class A market continued to tighten. Up until recently most of the significant rent growth has been in the Buckhead and Central Perimeter submarkets; however, we are now beginning to see strong rent growth carry over to additional submarkets such as Midtown, NW/Cumberland/Galleria, and Georgia 400.
“The unusually high spread between replacement cost rents and current rents has created one of the best rent growth environments in memory,” said Samir Idris, a Senior Director with Cushman & Wakefield’s Capital Markets Group. “It's kept a lid on new construction and allowed owners of existing inventory to increase occupancy and rents without challenge from new competitors. This is compounded by a significantly depleted land inventory in Buckhead and Central Perimeter, all of which is resulting in as much as 20% year-over-year growth for top properties.”

Although Atlanta’s construction pipeline for new office space remains conservative, several new project announcements have been made. As of the end of the third quarter, the major office projects under construction included Three Alliance, Tishman Speyer’s much-anticipated 500,000-square-foot class A office tower in the heart of Buckhead, and Riverwood 200, the 300,000-square-foot class A project by Highwoods Properties in the NW/Cumberland/Galleria submarket.

Investment sales activity in the Atlanta market remained strong during the third quarter totaling 5.3 million square feet, adding to the year-to-date total of 15.7 million square feet. Key sale transactions for the third quarter included the sale of Monarch Centre in Buckhead, which sold to Highwoods Properties for $303 million in September, and the sale of Mansell Overlook, which sold to The Brookdale Group for $125 million in August. Atlanta’s investment sales pipeline continues to strengthen, and we expect to continue to see this momentum continue throughout the end of 2015 and going forward into 2016.