Despite a slowing economy, Metro Atlanta continues to see some new development of office projects, according to John Flack, an associate with Carter and Associates in Atlanta. Flack attributes some of the continued growth to developments begun prior to seeing the signs of a slowing economy.

"There is certainly a slowdown in the market," Flack says. In mid-year 2001, including sublease space, the Atlanta market was looking at over 9 million square feet of vacant Class A office space.

Flack cites CoStar for comparisons of development and projected development over 3 years. "For Class A, B and C space, the year 2000 saw 8.04 million square feet of deliveries. Projected delivery for 2001 is 6.07 million square feet, while projections for 2002 drop substantially, going to a delivery of 2.04 million square feet," he says.

Because of the downward economic trend, "the market is pro-tenant and we' seeing a drop in rental rates as well as landlord concessions," Flack says. Also in the slower economy, anchor tenants are becoming the focus before the buildings are even coming out of the ground, he adds.

Although the capital markets for financing and underwriting new projects have become softer compared with the last few years, both speculative and build-to-suit projects continue to be developed, Flack says.

Recently, Midtown has been the site of several large developments, including the Proscenium, which is 529,000 square feet, the 500,000-square-foot Atlantic Center Plaza, and Millennium, a 435,000-square-foot building. The mixed-use complex at Lindbergh will also be a significant development, showing how a corporate user can utilize the rapid transit system. In Buckhead, the only building coming on line is One Alliance Center. Buckhead will continue to be a tight market largely because of current sewer moratorium, according to Flack.

Although substantial projects have begun or are underway in several metro submarkets, North Fulton continues to harness the majority of new office developments, with currently more than 2.1 million square feet under construction. Several key factors have contributed to this trend, including an abundance of commercially developable land at a lower cost basis, which suits the demand for Class A mid-rise space with efficient floor plates at Class B rental rates. Additionally, the market is relatively new (started in 1996) as well as being in close proximity to all types of housing, particularly executive and middle income residential developments.

Several companies in particular are responsible for major leases in the Atlanta area recently. Compu-Credit leased 122,000 square feet at Perimeter Center, Level 3 Communications has occupied 132,000 square feet at 180 Peachtree St., the Centers for Disease Control took 100,800 square feet at Century Center and the IRS leased 85,000 square feet at 6655 Peachtree Dunwoody.

Space is being absorbed in several areas of the city. Cingular Wireless came into the Atlanta market in late 2000, and to date has absorbed approximately 750,000 square feet of office space in two different submarkets. The company recently took 376,000 square feet in North Fulton on Windward Parkway in addition to an 80,000-square-foot data center also on Windward Parkway. In the Central Perimeter area, Cingular took 320,000 square feet at Glenridge Highlands. Additionally, BellSouth is absorbing approximately 3 million square feet of office space in the Midtown and Buckhead submarkets through its Metro Plan.

"In Central Perimeter and Midtown, you' see some space opening up that was previously occupied by dot coms, which will impact rental rates, forcing landlords to make concessions," predicts Flack, adding that people should keep an eye on the 400 corridor between Central Perimeter and North Fulton for development in the near future.

John Flack is an associate with Carter & Associates in Atlanta.


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