Office market still grim but stabilizing

The metro Atlanta office vacancy rate continued to grow in the final three months of 2009.

The area ended the fourth quarter with a vacancy rate of 16.8 percent, up from 14.8 percent at the end of fourth quarter 2008, according to a report by CoStar Group, a real estate information firm. Rental rates ended the fourth quarter at $19.14 per square foot, down from $19.21 per square foot reported during third quarter 2009.

Nearly 900,000 square feet of space was vacated during the fourth quarter, the worst single reporting period for occupancy losses in nine years, Jones Lang LaSalle said in its Atlanta office market report.

For all of 2009, Atlanta saw its overall office vacancy rate increase to 18.7 percent, from 16.9 percent in 2008, Colliers International reported, with some experts putting that rate at more than 20 percent.

A normal vacancy rate ranges from 10 percent to 12 percent, said Scott Amoson, director of research for Colliers. Turmoil in the housing and banking industry, company downsizings and tenants relocating and exiting the Atlanta market all contributed to the drop in occupancy, he said.

Still, 2010 promises a healthier outlook, analysts said, although they added the recovery will be slow and bumpy.

“2010 is going to be a year of stabilization — not necessarily growth or progress — but we won’t be seeing major declines,” said Lanie Rea, research manager with Jones Lang LaSalle in Atlanta. “It will still be trending down, but not nearly as steeply as when a market hits bottom. We had a lot of that in the fourth quarter. We saw big move-outs. We saw leasing activity at its lowest point; now momentum is starting to pick up.”

Excluding deliveries of new buildings, central Perimeter was hardest hit by move-outs in 2009, Colliers reported. More than 780,000 square feet of office space came back to the market, the report said, because of large exits by companies such as Macy’s and Verizon.