Office Absorption Totals 1.5 MSF for 2016, Leading to Lowest Vacancy Since 2001

Cushman & Wakefield released fourth quarter 2016 statistics today for the Atlanta office market that show the fourth quarter of 2016 experienced steady growth in several key areas. Overall average asking rental rates in the city increased slightly to top the previous quarter’s record. Average asking rates finished the year at $23.39 per square foot (psf), breaking the third-quarter record of $23.38 psf. Overall average asking rental rates in Buckhead are the highest in the city at $32.17, with a vacancy rate of 12.4 percent.

Overall vacancy in the fourth quarter totaled 15.8 percent, the same as the previous quarter, however leasing activity continued with 264 leases signed totaling 1.9 million square feet. This brought the year’s total to 8.3 million square feet of leasing activity. The Class A market experienced the second largest number of leases signed during 2016 with 609, but the most overall square footage with 5.4 million. Conversely, 622 leases were signed in the Class B market for a total of 2.7 million square feet.

In terms of overall occupancy gains, the fourth quarter experienced 344,563 square feet of absorption, leading to 1.5 million square feet of overall absorption for 2016. New-construction deliveries were low in the fourth quarter with the delivery of one building totaling 60,262 square feet at 2300 Defoor Hills Rd.in Midtown. For 2016, four projects were completed totaling 504,983 square feet, all of which were speculative.

Coda Tech Square in Midtown, which broke ground in December, is the largest spec office project under construction at 760,000 square feet, followed by the 500,000-square-foot Three Alliance in Buckhead, which is expected to be completed during the first quarter of 2017. Overall, 4.0 million square feet of office space is under construction, 1.7 million square feet of which is pre-leased.

2016 Year-End Highlights:

• Atlanta posted record overall asking rental rates, ending the quarter at $23.39 per square foot. This is up 5.2 percent compared to asking rental rates at year-end 2015.
• Rents in the Class A arena ended the quarter at $27.12 psf, the second quarter in-a-row Atlanta has seen an overall Class A average rent over $27.00. It has previously never topped that mark.
• Leasing activity for 2016 totaled 8.3 million square feet, down 6.7 percent from strong activity reported in 2015.
• Overall absorption has seen a decline compared to 2015, ending 2016 with 1.5 million square feet absorbed.
• Notably, the Northwest/Cumberland submarket captured the strongest absorption of Atlanta’s major office submarkets, totaling 646,575 square feet during 2016, driven by WellStar’s occupancy at Two Parkway Center.
• Overall vacancy (direct and sublease) ended the year at 15.8 percent, down 0.4 percentage points compared to 16.2 percent at the end of 2015. This is the lowest vacancy rate the market has seen since 2001.
• Construction activity continues its strong pace, with 4.0 million square feet of speculative space currently under construction. This is the largest amount of space under construction since 2008.

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.