Atlanta's office market ‘has hit bottom'

By Rachel Tobin Ramos

The Atlanta Journal-Constitution

At mid-year, Atlanta’s office market is showing some signs of improvement and recent hiring may keep the trend moving in a positive direction.

Several real estate firms, including Jones Lang LaSalle, CoStar Group, and Grubb & Ellis, believe Atlanta’s office market has reached its trough and is starting the slow climb back from recessionary lows.

“Atlanta’s office market has hit bottom since vacancy has basically peaked, which is the first step,” said Lanie Rea, research manager with Jones Lang LaSalle Americas.

“Rental rates, however, may continue to fall for another quarter or two which will cause the market to bounce along the bottom for a little bit. True recovery will come as leasing activity picks up, and this will be driven by job growth.”

Metro Atlanta’s vacancy rate still is at a historic high, one that hasn’t been seen since the 1980s, said a report by Richard Bowers & Co.

Real estate firms differ on how they calculate vacancy rates, but most show that the metrowide rate is near 20 percent. CoStar has it at 17.3 percent, Richard Bowers & Co. 19.7 percent, and Grubb & Ellis 22.4 percent

Atlanta has been unable to overcome the 7-million square foot increase in office space that was added to the market since the second quarter of 2008, Grubb & Ellis says.

To reach a “historically healthy” vacancy rate of 15 percent, Grubb & Ellis says the market needs to absorb more than 10 million square feet of office space.

That’s the darkside, said Jay Spivey, senior director of research and analytics for CoStar.

“Even if we have turned the corner here, there’s a long way to go in terms of burning off all this excess vacant space and getting those vacancy rates down.”

Cushman & Wakefield said that large lease transactions in the second quarter included: Law firm Greenberg Traurig leasing 110,000 square feet from Terminus 200 in Buckhead, GE Digital Energy leasing 107,000 square feet from 100 Parkwood Point on Powers Ferry Road in northwest Atlanta, and Novelis leasing 103,000 square feet at Two Alliance Center in Buckhead.