Atlanta Average Office Asking Rates End First Half of 2016 at $23.07, Marking Highest Recorded Rental Rate in Atlanta History

Cushman & Wakefield released mid-year 2016 statistics today for the Atlanta office market that show the second quarter of 2016 continued to see the momentum from the end of 2015 in several key areas. Along with record asking rental rates, the market posted strong overall occupancy, translating into a 1.2 percentage point decrease in vacancy year-over-year, ending the quarter at 16.0%, the lowest vacancy rate the market has seen since the third quarter of 2008.

Overall average asking rental rates in Atlanta set a new record in the second quarter, ending at $23.07 per square foot (psf), which is the first time the market has seen an overall asking rent over $23.00 psf. Class A rental rates are leading the charge, especially in the Buckhead submarket, where average asking rents are up 8.3% year-over-year finishing the first half of 2016 at $32.70 psf. The highest average asking rental rates are currently in the Midtown Class A submarket, which ended the quarter at $33.34 psf. As rental rates throughout metro Atlanta have increased over the past 12 months, the market has seen a significant pickup in speculative construction.

Kirk Diamond, Executive Managing Director with Cushman & Wakefield’s office tenant representation group, believes the positive trend will continue. “Metro Atlanta continues its robust recovery with significant rental rate increases and vacancy decreases in the ‘big 4’ markets – Midtown, Buckhead, Central Perimeter and the Northwest,” Diamond said. “Uniquely, the Northwest leads all markets in new construction with a full one-third of all new construction fueled by large corporate users either expanding or moving into the area – for example Delta Community Credit Union, Comcast, HD Supply, Synovus, Bennet & Thrasher, Aaron’s Inc. and Holder Construction. With healthy developer restraint exhibited during this cycle, we anticipate several more quarters of continued market improvement.”

Currently, there is over 3.1 million square feet of speculative office space under construction with approximately 60% of the space already pre-leased. This is the largest amount of construction the Atlanta market has seen since the construction boom in the Buckhead submarket between 2007 and 2009. As desired available office space continues to be at a minimum, additional proposed office projects could become a reality as large users, such as General Electric’s IT division, choose Atlanta for their headquarter needs.

The market saw a slight decline in leasing activity during the first half of the year, totaling 4.2 million square feet. This is down 17.7% from the first half of 2015. Central Perimeter captured the most leasing activity of 363,872 square feet. This was led by Anthem’s 101,000 square foot deal at Three Glenlake. The largest lease signed during the second quarter was Wellstar’s expansion at Two Parkway Center in the Northwest/Cumberland/Galleria submarket where it will be taking 112,000 square feet.

In terms of overall occupancy gains, the first half of 2016 has not been as active as 2015. Atlanta saw just 262,581 square feet absorbed during the second quarter for a year-to-date total of 527,102 square feet. This is well behind the pace of 2015, which saw 1.6 million square feet of net occupancy gains at mid-year. The largest move in recorded during the second quarter was Lincoln National Life Insurance, which occupied over 138,000 square feet at RiverEdge Summit in the Northwest/Cumberland/Galleria submarket. We expect a pickup in absorption in the second half of 2016 as the numerous large leases that were signed at the end of 2015 commence.

2016 Mid-Year Office Highlights:

Atlanta posted record overall asking rental rates, ending the quarter at $23.07 per square foot. This is up 5.0% compared to asking rental rates at mid-2015 and the first time Atlanta has seen an overall rent over $23.00. • Rents in the Class A arena ended the quarter at $26.88 psf and captured even more significant growth, up 5.5% year-over-year. • Leasing activity for the first half of 2016 totaled 4.2 million square feet, down 17.7% from strong activity reported in 2015. • Overall absorption has seen a decline compared to this time in 2015, ending the first half of 2016 with 527,102 square feet absorbed. • Notably, Midtown captured the strongest absorption of Atlanta’s major office submarkets, totaling 363,351 square feet year-to-date, driven primarily by Kaiser Permanente’s occupancy at Pershing Point Plaza. • Overall vacancy (direct and sublease) ended the quarter at 16.0%, down 1.2 percentage points yearover-year compared to 17.2% at 2015 mid-year. This is the lowest vacancy rate the market has seen since the third quarter of 2008. • Construction activity has seen a significant increase during the first half of the year, with 3.1 million square feet of speculative space currently under construction. This is the largest amount of space under construction since the first quarter of 2009.

- Atlanta posted record overall asking rental rates, ending the quarter at $23.07 per square foot. This is up 5.0% compared to asking rental rates at mid-2015 and the first time Atlanta has seen an overall rent over $23.00.

- Rents in the Class A arena ended the quarter at $26.88 psf and captured even more significant growth, up 5.5% year-over-year.

- Leasing activity for the first half of 2016 totaled 4.2 million square feet, down 17.7% from strong activity reported in 2015.

- Overall absorption has seen a decline compared to this time in 2015, ending the first half of 2016 with 527,102 square feet absorbed.

- Notably, Midtown captured the strongest absorption of Atlanta’s major office submarkets, totaling 363,351 square feet year-to-date, driven primarily by Kaiser Permanente’s occupancy at Pershing Point Plaza.

- Overall vacancy (direct and sublease) ended the quarter at 16.0%, down 1.2 percentage points yearover-year compared to 17.2% at 2015 mid-year. This is the lowest vacancy rate the market has seen since the third quarter of 2008.

- Construction activity has seen a significant increase during the first half of the year, with 3.1 million square feet of speculative space currently under construction. This is the largest amount of space under construction since the first quarter of 2009.

 About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.