Atlanta is ending the fourth quarter of 2009 with an office vacancy rate above 20 percent – the highest since the first quarter of 2005. Still, things were worse during the dot.com bust and after Sept. 11, 2001.
"While the Atlanta market struggled, it hasn't reached the depth of the previous recession," said Chris Shaner, the head of research for real estate services firm Cushman & Wakefield's Georgia office and author of a report issued Tuesday on the Atlanta office market.
In 2001, Atlanta was coming out of a building boom that added 8 million square feet of office space, but it coincided with the dot.com bust and Sept. 11, Shaner said. The highest vacancy rate this decade was 25 percent in the first quarter of 2004, he said.
The high office vacancy rate in the last quarter of this year is a direct result of layoffs in metro Atlanta, Shaner noted. In November, metro Atlanta's jobless rate was 10.1 percent, and this year, the national unemployment rate hit double digits for the first time since 1983.
"2009 was probably the toughest year economically we'll have to go through," he said. "Now that we've come to the end of the recession, we should hopefully see a light at the end of the tunnel."
The submarket that was hardest hit by companies vacating office space was Perimeter, near Ga. 400, said Shaner. That area had a negative net absorption rate of 1.3 million square feet. That means more tenants moved out of office space than moved into office space.
"Corporate downsizing really hurt the Perimeter," said Shaner, who noted AT&T and Macy's were among companies that vacated office space there. The Perimeter's fourth-quarter vacancy rate was 22.1 percent.
Still, Atlanta is adding office space, even as demand for it has subsided. Developers completed six speculative office buildings in 2009 with 1.9 million square feet of office space that are 14 percent leased, according to Shaner's report. Among them: Terminus 200 and Two Alliance Center, both in Buckhead, and 271 17th Street in Atlantic Station, Shaner said.
Next year, 1.6 million square feet of office space is expected to be completed, including 3630 Peachtree Road, Phipps Tower and 1075 Peachtree Street, Shaner said.
The Atlanta market will end 2009 with a negative overall absorption rate of 2.3 million square feet.
In 2008, that number was a positive 832,000 square feet, and in 2007, it was a positive 3.3 million square feet.
Shaner said there is an upside: Buyers of commercial real estate will find good opportunities in Atlanta.
Tenants are also benefiting, as they are finding greater lease concessions (including free rent).
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