Despite increase, Atlanta still offers some of the lowest rates in the country
The asking rents for trophy office space in Atlanta have grown faster since the first quarter of 2014 than those in any other market nationwide, a new report from JLL reveals.
Asking rates for trophy space increased 27.3 percent over the past five uarters, beating Raleigh, North Carolina, which saw rents increase by 23.9 percent, and Oakland, California, which experienced a 15.4 percent increase in rents. Despite the increase, Atlanta still offers some of the lowest asking rents of any office market in the country, averaging $25.80 per square foot.
“This is one of the many reasons that corporate occupiers take such a strong interest in relocating to Atlanta, building a regional presence here or expanding their footprint,” said Juliet Potter, Vice President of Research for the Atlanta Market.
The findings were included in JLL’s proprietary 2015 Digital Skyline, which identifies and tracks micro-segments of 47 city centers across North America. The Skyline features trophy and Class A buildings where tenants and investors alike focus demand for office space in a flight to quality and efficiency.
“Atlanta’s real estate market has entered the expansion phase of the cycle and the class A office sector has entered a ’Landlords’ market,” said Mike Sivewright, JLL’s Market Director for the Atlanta region. “With the rebound of the real estate market and little new office supply in the development pipeline asking rents are expected to continue to increase well beyond current levels, Atlanta’s trophy buildings remain largely occupied. As a result, many companies are looking to Class B space as their primary option.”
Atlanta experienced some of the highest net absorption of Class A space since the first quarter of 2014.
However, even with the tightening conditions, there remain limited large blocks of vacant space within high-profile buildings in certain submarkets. Bank of America Plaza in Midtown, for example, is only 48.2 percent leased and has 481,056 square feet of vacant space.
“The flight to quality early in the recovery years coupled with an improving economy today has led to significant supply constraints in the country’s highest-quality office buildings, and the rent gap has widened significantly,” Potter said.
Tenants in Atlanta can expect little relief in the near future as just 1 percent of Atlanta’s inventory is currently under construction. Since new construction won’t alleviate the immediate demand for space, rents are likely to continue to increase for the foreseeable future.
(Photo caption: Downtown Atlanta skyline at dusk; Photo by apple.white2010/Wikimedia Commons)
