Below is a report issued by Cushman & Wakefield’s Atlanta Research Department:
Office: Atlanta’s office market reported 2.3 msf of negative overall absorption in 2009, as sublease vacancies increased 133.0% during the past year to nearly 3.5 msf. Taken together with 1.9 msf of speculative construction completions, overall vacancy increased to 20.2%. Overall average asking rents were relatively stable at $21.32 per square foot (psf); however, increased concession packages were prevalent. During the year, just 1.3 msf traded for roughly $100.0 million.
It’s apparent that Atlanta’s economic recovery will lag the national recovery. As its inventory of vacant office supply continues to grow, downward pressure on rents will intensify in 2010. Investment activity will remain limited, though opportunistic investors may find increased opportunity. Atlanta’s office market is expected to stabilize in the second half of 2010, with a sustained recovery in the market unlikely to take hold until early 2011.
Industrial: Industrial space users sought operational cost savings through consolidation in 2009, as 2.8 msf of negative overall absorption marked the first year of negative absorption in Atlanta’s industrial market since 2002. The impact of these losses on vacancy was mitigated by a relative lack of development activity during the year, as just less than 2.0 msf completed this year. At year-end, 642,233 sf were under construction in two build-to-suit projects. Overall vacancy increased 1.5% in 2009 to 10.6%, but remained well below peak rates reported during the previous recession. Atlanta reported nearly 3.9 msf of investment sales, the vast majority of which traded as part of ProLogis’ 33.0-msf nationwide industrial offering.
Continued expansion in the industrial indices will result in increased leasing activity in 2010, especially among distribution facilities attracting headquarters relocation activity. Speculative development will be limited, as developers remain focused on build-to-suit projects. Though overall investment sales levels may decrease from 2009, individual sales transaction should increase particularly among long-term net-leased properties.