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JGRE Market Report: The Atlanta Office Market,
continued
The
Atlanta Office Market feels like a train sprinting down
the track, but where is this train really headed? How
long will this train continue running at this speed?
These are questions many Tenants, Landlords and Brokers
are evaluating when they seek to make real estate
decisions in the next 12-24 months.
The
fundamentals support the market chugging along for at
least a little while longer. Office construction
remains relatively tame with only about two million
square feet under construction, a small number for the
300 million square foot Atlanta office market. If you
remember the last bubble (2008-2010), we had four spec
office buildings in Buckhead alone being delivered
within 12 months of each other. Today there is only one
new 500,000 square foot spec building in Buckhead, a
submarket where total vacancy is approximately 10%.
Low
vacancy rates will mean many Tenants with renewals
coming due in 2016-2018 will see their rents
significantly higher than before. As a result, numerous
tenants will ultimately seek either less expensive
alternatives or seek further efficiencies in their
office requirements.
The next
market fallout could come when all the recent corporate
relocations (Mercedes Benz, State Farm and others) move
from their temporary locations to their permanent homes
in late 2016 through 2018. Coupled with State Farm’s
recent addition of 320,000 SF added to the sublease
market, there will be a glut of excess space in the
Central Perimeter market. Currently, Central Perimeter
is bullish as Perimeter Summit just broke ground in late
January on a 15 story spec building, which will deliver
in about 24 months. Additionally Sandy Springs and
Dunwoody have announced two new live/work/play
“New Urbanism” projects which could bring additional product
to the market
Time
will tell if this train decides to change its course…
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