The Atlanta Commercial Board of REALTORS Releases Q1 2017 Office Market Statistics
Wednesday, April 19th, 2017
The Atlanta Commercial Board of REALTORS, the largest commercial REALTOR association in the country, released its Q1 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 old maritime saying ‘steady as she goes’ is probably the best summation of the Atlanta office market for the First Quarter," said F. Keene Miller, 2017 ACBR Board President, and President of Brokerage for Ackerman & Co. "Activity is relatively strong, however new demand is significantly less robust. Net Absorption moved into negative territory, albeit only slightly, which is reflective of a number of headwinds facing office space utilization. However, I don’t expect this trend to continue over the course of the year, and I believe we'll see positive numbers as the year progresses.
He went on to explain, "absorption continues to be balanced by restrained new office development, much of which is pre-leased. There are a number of very large potential requirements in the market, which would represent significant new positive absorption...if they materialize. This would certainly be accredited to market dynamics and be very positive for the Atlanta Marketplace."
LABOR: According to the Bureau of Labor Statistics, the unemployment rate rose 0.2 percentage points from 5.1% in January 2016 to 5.3% in January 2017. The unemployment rate increased due to more people looking for work and compares favorably to Georgia (5.5%) and higher than the US (4.8%). The Atlanta metropolitan statistical area nonfarm job creation totaled 96,800 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 35,100 jobs during the past year.
ABSORPTION:The Atlanta office market recorded a negative 182,009 square feet (sf) of overall absorption during 1Q 2017. Direct absorption totaled negative 13,178 sf. Absorption during the first quarter was off to a slow start for 2017. Major occupancies by State Farm, Anthem, Regus, Kore Telematics and Rock 10 were not able to overcome vacancies by Coca-Cola, the State Farm sublease and several small- to mid-sized companies. Absorption is expected to increase during the rest of 2017. Global Payments, State Street Corp., Racetrack, Anthem, and Equifax are all expected to occupy more than 50,000 sf during 2017. As the Class A vacancy rate continues to drop, demand for space in Class B buildings is expected to increase. Currently, only ten 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 fit for their Southeast destination.
VACANCY: Weighted average rent growth continued to improve during 1Q 2017, especially in Class A properties in Buckhead, Midtown and Central Perimeter. Weighted average asking rents in all classes rose 5.0% recording $23.10 per square foot (psf) at the close of 1Q 2017, compared to 1Q 2016. Class A weighted average rents rose 6.2% year-over- year, recording $26.20 psf at the close of 1Q 2017. Class B rents rose 1.8% year-over- year, recording $20.33 psf at the close of 1Q 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.