OFFICE
MARKET UPDATE
ATLANTA OFFICE MARKET :: MID YEAR 2014
MARKET INDICATORS
INVENTORY
210,348,158 SF
OVERALL VACANCY
16.9%
ABSORPTION *
2,227,958 SF
CONSTRUCTION
776,642 SF
DELIVERIES *
177,000 SF
OVERALL DIRECT
AVG. LEASE RATE
$19.62
MARKET HIGHLIGHTS
Leasing activity continues to propel the Metropolitan Atlanta Office Market in
2014. Our region registered almost 2.3 million SF of positive absorption for the
first six months of the year, making the thirteenth straight quarter of net leasing
gains. Our research indicates corporate expansions are driving this occupancy
momentum; in part a reflection of the recovering economy and ramped up hiring
practices. While relocations such as PulteGroup and growth from Airwatch, Fiserv
and State Farm make headlines, as illustrated herein many firms are expanding
and pushing absorption levels past expectations.
Our firm has recognized the leasing velocity trends moving northward on
Peachtree/GA 400 starting in 2011 (Midtown), 2012 (Buckhead), 2013 (Central
Perimeter), now reaching North Fulton this year. Fiserv’s (376,300 SF) and
Kimberly Clark’s (187,700 SF) lease committents at Cobalt Center and 5405
Windward Parkway respectively illustrate this point and we project more significant
announcements during the next six months. Does this momentum suggest we will
see new construction in these submarkets? There is plenty of chatter on this
subject but no starts announced at the time of this report.
Institutional interest in Atlanta is back, with investors eager to add metropolitan
assets to their portfolio. While the region has seen fewer offerings hit the market
during the first half of 2014, a number of significant transactions occurred.
Notable trades include Centrum at Glenridge ($152.93/SF), One Live Oak
($113.06/SF), Northlake Office Park ($39.92/SF), Gwinnett Center ($59.88/SF),
and 730 Peachtree ($90.27/SF). These transactions represent value play
opportunities, serveral in submarkets which have not seen material absorption
gains over the past three years. On a smaller scale there have been twelve owner
occupant purchases over the past six months continuing a trend that generally
benefits our markets region-wide.
METRO ATLANTA REPRESENTATIVE SALES ACTIVITY
INVESTMENT SALES
OWNER/USER SALES
Centrum at Glenridge
186,360 SF
$152.93/SF
Purchased by Origin Capital Partners on 02/24/14
6375 Hospital Parkway
101,991 SF
Purchased by Ebix, Inc. on 06/13/14
One Live Oak Center
201,400 SF
$113.06/SF
Purchased by Highbrook Investment on 01/03/14
1975 West Oak Circle
60,000 SF $112.00/SF
Purchased by Vanderlande Industries on 06/25/14
730 Peachtree Street
213,041 SF
$90.27/SF
Purchased by Harbert Management on 01/10/14
5519 Spalding Drive
50,000 SF
$84.50/SF
Purchased by United Arab Shipping on 03/27/14
* Figures reflected throughout this report for ABSORPTION and DELIVERIES
are cumulative for mid-year and year end as appropriate.
$122.56/SF
Lavista Associates, Inc. - Atlanta, Georgia
ATLANTA OFFICE MARKET :: MID-YEAR 2014
KEY METRO ATLANTA SUBMARKETS
BUCKHEAD
CATEGORY
VACANT
SF
CURRENT QTR
3,023,456
SF UNDER
CONSTRUCTION
125,000
RENTAL
RATE
$24.66
ABSORPTION
SF
315,431
DELIVERIES
0
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
3,338,887
‐9.45%
Mid‐Year 2013
3,805,894
‐20.56%
Year End 2013
125,000
0
Mid‐Year 2013
125,000
0
Year End 2013
$24.39
+$0.27
Mid‐Year 2013
$23.87
+$0.79
Year End 2013
467,007
(151,576)
Mid‐Year 2013
118,286
197,145
Year End 2013
0
0
Mid‐Year 2013
47,500
(47,500)
. Robust leasing activity continues in Buckhead as it posted
315,431 SF of absorption in the first half of 2014.
. As of second quarter, the vacancy rate dropped to 14.8%;
down 8.3% in three years.
. With few developments under construction (already preleased) rental rates will continue to climb.
ACTIVITY: Blue Cross Blue Shield of Georgia expanded to
228,400 SF at One Capital City Plaza; CoStar Group expanded
into 43,800 SF at Phipps Tower; PulteGroup relocated into
108,000 SF at One Capital City Plaza as well.
CENTRAL PERIMETER
. Atlanta’s most active submarket registered 685,456 SF of
net absorption in the first six months of 2014.
CATEGORY
. Central Perimeter’s vacancy rate dropped to 15.1%; down
from 24.2% three years ago.
. KDC has started construction of Phase I of State Farm’s
regional headquarters, the only development in this
submarket currently.
ACTIVITY: CH2M Hill Companies relocated into 97,400 SF at
Embassy Row; First Data continues to expand (194,000 SF) at
Glendridge Highlands II; Hughes Telematics has expanded into
116,000 SF at 2002 Perimeter Summit.
CURRENT QTR
VACANT
SF
4,386,507
SF UNDER
CONSTRUCTION
0
RENTAL
RATE
$21.50
ABSORPTION
SF
685,456
DELIVERIES
0
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
5,071,963
‐13.51%
Mid‐Year 2013
5,710,105
‐23.18%
Year End 2013
0
0
Mid‐Year 2013
0
0
Year End 2013
$21.02
+$.048
Mid‐Year 2013
$20.76
+$0.74
Year End 2013
597,142
88,314
Mid‐Year 2013
623,286
62,170
Year End 2013
0
0
Mid‐Year 2013
0
0
DOWNTOWN
CATEGORY
CURRENT QTR
VACANT
SF
4,212,928
SF UNDER
CONSTRUCTION
0
RENTAL
RATE
$17.78
ABSORPTION
SF
244,728
DELIVERIES
0
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
4,457,656
‐5.49%
Mid‐Year 2013
4,851,759
‐13.17%
Year End 2013
0
0
Mid‐Year 2013
0
0
Year End 2013
$18.54
‐$0.76
Mid‐Year 2013
$18.40
‐$0.62
Year End 2013
394,103
(149,375)
Mid‐Year 2013
13,679
231,049
Year End 2013
0
0
Mid‐Year 2013
0
0
Lavista Associates, Inc. - Atlanta, Georgia
. Downtown Atlanta’s leasing improvement is evidenced by the
244,728 SF of absorption through mid-year.
. Accordingly, vacancy rates continue to drop and reached
16.0% through the first six months of 2014.
. Given the 4+ million square feet still available, rental rate
increases will be difficult for this submarket to achieve.
ACTIVITY: Office of the Public Defender leased 48,000 SF at 100
Peachtree Street; Coca-Cola Company completed its relocation
into 275,800 SF at SunTrust Plaza Garden Offices; Habitat for
Humanity expanded at 270 Peachtree Street by 8,200 SF.
ATLANTA OFFICE MARKET :: MID-YEAR 2014
KEY METRO ATLANTA SUBMARKETS
MIDTOWN
. Midtown’s net absorption through mid-year 2014 totaled
333,850 SF; it’s best six month period in two years.
. This submarket’s vacancy rate continues to drop (notice a
theme here), ending the first two quarters at 16.0%.
. With Ponce City Market opening, no new office development
is planned at this point.
ACTIVITY: Swift, Currie, McGhee & Hiers, LLP has expanded to
106,900 SF at 1355 Peachtree Street; Purchasing Power leased
46,200 SF at Two Midtown Plaza; Athenahealth & Cardlytics
began relocating to Ponce City Market.
NORTH FULTON
CATEGORY
VACANT
SF
CURRENT QTR
4,214,259
SF UNDER
CONSTRUCTION
109,958
RENTAL
RATE
$19.00
ABSORPTION
SF
275,233
DELIVERIES
100,000
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
4,389,492
‐3.99%
Mid‐Year 2013
4,558,651
‐7.55%
Year End 2013
209,958
(100,000)
Mid‐Year 2013
209,958
(100,000)
Year End 2013
$18.69
+$0.31
Mid‐Year 2013
$18.40
+$0.60
Year End 2013
169,159
106,074
Mid‐Year 2013
68,639
206,594
Year End 2013
0
100,000
Mid‐Year 2013
0
100,000
. Northeast Atlanta posted disappointing performance
numbers at mid-year with negative (73,042) SF of
absorption.
. This submarket’s vacancy rate is 22.8%, virtually unchanged
for four years.
. Despite no new speculative development, the 5+ million SF
of vacant space will challenge any improvements, especially
in Peachtree Corners.
ACTIVITY: Career Builder expanded into 98,500 SF at The
Summit; Encompass Insurance renewed in 20,600 SF at
Sugarloaf Office III; United Arab Shipping purchased 50,000 SF
at 5515 Spalding Drive.
* Figures reflected throughout this report for ABSORPTION and DELIVERIES
are cumulative for mid-year and year end as appropriate.
CATEGORY
VACANT
SF
CURRENT QTR
3,257,909
SF UNDER
CONSTRUCTION
487,034
RENTAL
RATE
$23.84
ABSORPTION
SF
333,850
DELIVERIES
0
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
3,591,759
‐9.29%
Mid‐Year 2013
3,747,075
‐13.05%
Year End 2013
487,034
0
Mid‐Year 2013
487,034
0
Year End 2013
$24.65
‐$0.81
Mid‐Year 2013
$25.32
‐$1.48
Year End 2013
155,316
178,534
Mid‐Year 2013
(11,336)
345,186
Year End 2013
0
0
Mid‐Year 2013
0
0
. As projected, North Fulton’s time has arrived as evidenced
by the 275,233 SF of net absorption posted for the first half
of 2014.
. The second quarter 2014 marked the fourth consecutive
period the vacancy rate has dropped
. Despite two significant recent commitments, North Fulton
still offers three alternatives with over 100,000 SF
contiguous availabilities.
ACTIVITY: McKesson Corporation leased 34,000 SF at Royal
Center Three; Kimberly Clark committed to 187,700 SF at 5405
Windward Parkway; Fiserv, Inc. executed a lease for 376,300 SF
at 2900 and 2950 Westside Parkway.
NORTHEAST
CATEGORY
CURRENT QTR
VACANT
SF
5,060,996
SF UNDER
CONSTRUCTION
0
RENTAL
RATE
$16.52
ABSORPTION
SF
(73,042)
DELIVERIES
0
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
4,987,954
+1.46%
Mid‐Year 2013
4,990,775
+1.41%
Year End 2013
0
0
Mid‐Year 2013
60,000
(60,000)
Year End 2013
$16.33
+$0.19
Mid‐Year 2013
$16.34
+$0.18
Year End 2013
62,821
(135,863)
Mid‐Year 2013
121,215
(194,257)
Year End 2013
60,000
(60,000)
Mid‐Year 2013
344,476
(344,476)
Lavista Associates, Inc. - Atlanta, Georgia
ATLANTA OFFICE MARKET :: MID-YEAR 2014
KEY METRO ATLANTA SUBMARKETS
NORTHWEST
CATEGORY
CURRENT QTR
VACANT
SF
5,806,021
SF UNDER
CONSTRUCTION
16,650
RENTAL
RATE
$19.24
ABSORPTION
SF
72,689
DELIVERIES
0
PREVIOUS TIME PERIODS
CHANGE
Year End 2013
5,878,710
‐1.24%
Mid‐Year 2013
5,792,304
+0.24%
Year End 2013
16,650
0
Mid‐Year 2013
116,650
(100,000)
Year End 2013
$18.83
+$0.41
Mid‐Year 2013
$18.49
+$0.75
Year End 2013
13,594
59,095
Mid‐Year 2013
159,413
(86,724)
Year End 2013
100,000
(100,000)
Mid‐Year 2013
0
0
. The Northwest submarket continues to bounce around,
posting 72,689 SF of absorption through June 2014.
. This submarket’s vacancy rate remains virtually unchanged
at 18.5%.
. Atlanta’s largest submarket also offers the most available
space (5.8 million SF), more than 1.5 million more than
Central Perimeter.
ACTIVITY: CP Kelko expanded again in Cumberland Center II,
taking 68,300 SF; Sterling Risk Advisors relocated into 25,000
SF at 2500 Cumberland Parkway; N3,LLC committed to 24,400
SF at The Dupree Building.
LAVISTA ASSOCIATES, INC. REPRESENTATIVE OFFICE TRANSACTIONS
SALE TRANSACTIONS
LEASE TRANSACTIONS
. John Cape and Ed O’Connor represented the Seller
in the sale of the Gates at Sugarloaf project in
Suwanee.
. Rob Binion represented Ignite Communications on their
20,000 SF lease renewal at 11145 Johns Creek Parkway
in Johns Creek.
. Representing the Seller, Don Perry brokered the sale
of 4121 - 4181 Steve Reynolds Boulevard in
Norcross.
. Charlie Fiveash assisted Hotel Systems Pro with their
10,500 SF lease transaction at 280 Interstate North in
Atlanta.
. Rob Binion represented the Seller in the disposition
of a 17,100 SF building at 882 North Main Street in
Conyers.
. Representing Booster Enterprises, Will Grogan brokered a
15,200 SF lease at Woodside Center in Alpharetta.
Sources include: CoStar Office Report:
Mid‐Year 2014 and Lavista Associates, Inc.
No warranty or representation, expressed or implied, is
made as to the accuracy of information contained herein.
In consideration of the within information, all parties agree
to rely solely on their right, and assume the duty to
independently obtain and analyze all information.
Lavista Associates, Inc.
3475 Piedmont Road, NE | Suite 1150
Atlanta, Georgia 30305
770.448.6400
www.lavista.com
Lavista Associates, Inc. - Atlanta, Georgia
08.01.14