Downtown Atlanta’s Class A buildings outperformed the Midtown and suburban Class A segments of the market in terms of overall vacancy, including sublease space. “If there is any hint for recovering market conditions, it will likely be seen in Downtown Atlanta first,” says Mark Lucas, managing director of Jones Lang LaSalle in Atlanta. This is a trend that is occurring in other southeastern urban office sectors.

Despite an increase in leasing activity and renewals, Downtown and Midtown still have some 6 million square feet of direct and sublease space that is vacant. Four times that amount of space is available in suburban markets, where owners are aggressively marketing. The Downtown sector accounted for all of intown Atlanta’s positive absorption — most of which occurred in Class A product. Midtown recorded impressive gains as well as attracting some of the city’s largest office users, including some of the biggest and most sought-after requests for proposals this year.

“As far as new office construction, there is nothing currently underway,” says Lucas. “Many projects are proposed for Downtown, but each will require significant pre-leasing to see construction begin.” These projects include Park Tower at Centennial Hill, Turner Tower, Georgia Center II and 55 Park Place II.
The majority of proposed construction will take place in the area surrounding Centennial Park. This is the area where land is predominantly available, and it is also a prime location for area amenities. Several live/work/ play developments are also proposed for this area.

Downtown Atlanta is predominantly made up of government entities, law firms, and finance/insurance and real estate tenants. Of note are law firms expanding their operations within Atlanta’s intown sector, including Holland & Knight, Alston & Bird, Troutman Sanders and Hunton & Williams.

Quoted rental rates range from $17 to $30 per square foot with the average falling in around $21 to $22.
“Vacancy rates in Downtown are the lowest in the city at a level of 9.5 percent; however, it should be pointed out this market has over 500,000 square feet of Class A sublease space currently available,” Lucas notes.
The carryover effects of 2001 coupled with declines in leasing activity resulted in subdued real estate statistics for Atlanta’s office market sector at mid-year. Generally, availabilities including sublease space continue to place vacancy concerns at the forefront of most landlords’ minds.

“The good news is buildings under construction are at a minimum; nearly all proposed development has been put on hold and there is a great sale going on — this could not be a better time for tenants to negotiate favorable rates. Reduced rental rates and free rent equivalent to 10 percent of the lease term, along with generous tenant improvement packages, exemplify second quarter negotiations,” says Lucas.

“Future performance of the Atlanta office market will most likely mirror the overall economy, albeit with a slight lag,” he continues. “Whereas 80 percent of office space is currently leased, the most recent spate of downsizing, caused by continued telecom sector problems and corporate malfeasance disclosures, has left many companies leasing more space than they currently require. Thus, an additional 10 percent of space is unoccupied, creating a true vacancy rate of approximately 30 percent. Recovery therefore has been sequential, with companies absorbing unused space prior to expanding into sublease or vacant space.”

Despite softening market conditions through mid-year, an increase in lease activity is occurring during the latter half of 2002 with sizeable lease prospects of 40,000 to 150,000 rentable square feet prevalent in each of Atlanta’s five major submarkets. Assuming these anchor-caliber prospects sign commitments by year-end, it may signal that Atlanta is slowly showing signs of an economic recovery.


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