SOUTHEAST SNAPSHOT, JANUARY 2006

Atlanta Office Market

Mixed-use developments like the new Atlantic Station, which is receiving favorable reviews, are arising all over Atlanta. The 138-acre Atlantic Station is situated on a remediated brownfield and encompasses Barry Real Estate's 500,000-square-foot Allen Plaza office complex, named after former Atlanta mayor Ivan Allen Jr. Atlantic Station also includes apartments, condominiums, townhouses, shops, restaurants and entertainment. “Atlantic Station has extended the Midtown submarket across Interstates 75/85 to the west,” says Kelly Sydney of Newmark Global Real Estate Advisors.

Allen Plaza has attracted Southern Company and Ernst & Young to its offices. Southern Company recently leased an additional 90,000 square feet at 30 Allen Plaza with plans to open this month. Ernst & Young will anchor 55 Allen Plaza, which will open in 2007. Developments like this have helped the Atlanta office market weather the current economic climate lingering across the nation.

According to Sydney, Buckhead and Midtown each have more than 1 million square feet of new office space under development. Cousins Properties has begun grading for its 25-story, 532,000-square-foot Terminus office tower in Buckhead, which is set for completion in second quarter 2007. Regent Partners also has an office tower planned in Buckhead. The 47-story, 480,000-square-foot tower will be located on Peachtree Road at Tower Place and will include 21 luxury condominiums. It is scheduled to be completed in third quarter 2007. Other developers remain aggressive in pursuing pre-leasing for their projects as third quarter numbers show only 35 percent of the square footage under development is pre-leased. So, the competition is fierce.

The established Atlanta office market has seen a number of large leases signed recently. Those include BlueLinx Corporation's renewal of 250,000 square feet at Wildwood Park, Arby's Restaurant Group's new lease of 97,042 square feet at 1155 Perimeter Center West, and RaceTrac Petroleum's new 96,675-square-foot lease at Cumberland Center IV. Piedmont Healthcare expanded to 96,949 square feet at Paces West in northwest Atlanta; Med Assets expanded to 57,000 square feet at North Point Center East in the north Fulton submarket; and Novelis expanded its headquarters by 15,910 square feet at the Lenox Building in Buckhead.    

“No single tenant has driven the majority of office absorption in 2005,” Sydney says. But, as of third quarter 2005, Atlanta has reached the 1 million square feet mark in office absorption for the sixth quarter in a row. The absorption this year is expected to net more than 4 million square feet.

According to Sydney, the average Class A rental rate in metropolitan Atlanta stands at $21.73 per square foot with the Downtown average standing at $22.64 per square foot, the Midtown average standing at $22.69 per square foot and the Buckhead average standing at $26.28 per square foot. The overall vacancy rate for Class A and B direct space in metropolitan Atlanta is 17 percent, while Downtown is 21.7 percent, Midtown is 12.4 percent and Buckhead is 17 percent.

“Momentum will continue for Atlanta's office market, especially in the Downtown submarket,” Sydney says. Interest is higher than it has ever been for this submarket. The new Georgia Aquarium opened in downtown Atlanta in November 2005. In its first year of operation, the aquarium will attract more than 2 million visitors to the submarket. With that, the Centennial Hill district in downtown has become popular for development activity. Barry Real Estate, along with developing Allen Plaza, is planning retail space and two new condominium towers in Centennial Hill.    

— Daniel Beaird


©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.