Alpharetta (Atlanta) Office Market
by Chuck Moody

The North Fulton County office market has compelling long-term reasons for users to continue to locate their offices, and for institutions to invest their dollars in Alpharetta, according to Chuck Moody, director of national business development for Opus South Corp.

“The industry base in this market has expanded beyond the primary stalwarts of insurance, telecommunications and technology that usually drive absorption,” says Moody. He says that the requirements of companies in new industries such as logistics, information services, engineering consulting, equipment manufacturing and financial services have become more prevalent in North Fulton, making the market more immune to the belt-tightening currently taking place in the overall national economy. He also notes that the area’s high quality of life, such as favorable commercial and residential real estate prices, an abundance of new retailers and restaurants, high-quality schools, parks and other recreational facilities, as well as the desire for executives and employees to locate offices closer to home, will continue to drive demand for more office space in North Fulton.

The majority of current new development in Alpharetta, according to Moody, has been and continues to be located on North Point Parkway east of GA 400 and between Windward Parkway and Haynes Bridge Road, and on both sides of GA 400 (east & west) on Old Milton Parkway, Windward Parkway, Haynes Bridge Road and Mansell Road. Proximity to GA 400 is the primary reason for development, according to Moody.

Major leases that have been closed recently in the area include 300,000 square feet for UPS Logistics Group Headquarters at Opus Woods; 225,000 square feet on North Point Parkway by MCI World Com; 115,000 square feet at GA 400 Center by Met-Life; 70,000 square feet at Opus Parkview One with Spherion; and 70,000 square feet at Sanctuary Park for Colonial Pipeline.

Current full service rental rates for Class A office properties continue to hold steady between $20.50 and $23.50 per RSF. Overall vacancy rates in the submarket are reported at 18.5 percent for all classes of space, with Class A space at 17.6 percent including the sublease space.

Moody points out that six or seven years ago, there was less than 700,000 square feet of office space in the Alpharetta market. “Today, the total market exceeds 15 million square feet,” he says. Because of this, he notes that, with the exception of one or two small private developments, the current cast of players in the market is virtually the same group that has been involved from the beginning of the cycle in the mid-1990s.

One of the most interesting and attractive features of this submarket, according to Moody, is that there is not one single tenant that is dominating absorption. “Some might argue that MCI World Com fits the description,” he says. “But, overall, I don’t see any one tenant — or industry, for that matter — dominating the market absorption, and that is a very positive element of the market from a risk perspective.”

“It is important to keep things in perspective regarding North Fulton County,” says Moody. He points out that there is not much land left on the east side of GA 400, and most of the large land parcels are spoken for. Moody also notes that, although there is development land on the west side of 400, it will take a few more years before the West Side Parkway rivals Northpoint Parkway on the eastside. “Something to keep in mind is that North Fulton has grown to the point that today it represents slightly more than 10 percent of the total market,” he says. “But market absorption has represented over 30 percent of the absorption metro wide in the past few years and before this year ends, the same will still be true.”

At the same time, Moody points out that a sewer moratorium was recently issued on March 23 in North Fulton County by the state Environmental Protection Division because the Big Creek sewage plant violated standards in its effluent release during November, December and January. “The recently announced sewer moratorium will certainly slow development,” says Moody, “although the slow down in the national economy might have produced a very similar result without the moratorium.” According to Moody, the moratorium will last until Big Creek operates for at least three consecutive months without effluent limit violations. He also says it is possible that the moratorium will be lifted by early fall as the effluent improves during the dry season. “However,” he says, “if the moratorium is lifted, it could and likely will re-occur during the rainy season next winter, impacting future development. Stay tuned, as it will be some time before this is resolved completely.”

“I am convinced that the GA 400 corridor will continue to be very interesting to watch.” says Moody. “Right now the vacancy is higher than it has been in a few years, but one thing we have learned about this market is that if you focus too much on the vacancy rate and what’s under construction, you better not blink, because it will change right before your eyes.” When the current round of under-construction buildings deliver, and even in the face of slower demand over the next 12 months, Moody says that the area could experience a significant drop in the vacancy rate as new development is halted by the possibility of an extended moratorium. “This would result in a tight market like we have not experienced in North Fulton, therefore increasing rental rates significantly,” he says.


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