Grubb & Ellis Q1 Atlanta Office Market Snapshot

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The following summary was provided by Grubb & Ellis to provide a brief overview of the Atlanta office market during the first quarter of 2010.

Office vacancy increased to 22.6 percent in the first quarter 2010, up 100 basis points from the fourth quarter 2009 largely due to the delivery of 1.6 million square feet of new construction and 127,800 square feet of negative net absorption.
Class A asking rents increased $0.05 to $23.59 per square foot from the previous quarter, reflecting the trend of landlords competing more aggressively for tenants.
Despite the increase in overall availability, the amount of sublease space available decreased by approximately 144,000 square feet to a total of 5.6 million square feet of sublease space.

Analysis:
While the region experienced its fourth consecutive quarter of negative net absorption, the 127,800 square feet posted to the market in the first quarter is an improvement over the more than 800,000 square feet of negative absorption posted during the fourth quarter of 2009, indicating that losses are moderating. Corporate profits are on the rise, and businesses are beginning to take advantage of favorable market conditions to realize both short- and long-term cost benefits. The biggest remaining challenge is the delivery of new construction over the past two years with only a quarter of the space leased. With no new buildings under construction and developers facing financing challenges, however, there should be ample time to fill vacancies absent new deliveries, allowing the market to reach a natural balance of supply and demand.

Forecast

New construction activity will be limited to medical office space and niche product types
Rental concessions offered by landlords will remain aggressive, particularly in Buckhead and Midtown, where older product is competing against newly delivered space
Large blocks of available Class A office space in Buckhead will have leasing success in 2010, at the expense of older Class A product in the submarket

To access the full Atlanta Office Metro Trends report and other Grubb & Ellis research publications, visit www.grubb-ellis.com/research.