Colliers: Could 1.5M SF Be Atlanta's New Office Absorption Norm?

Atlanta's office market ended the year on solid ground, with 1.5M SF absorbed by companies expanding in the area's office market. 

That was led, though, by a burst of activity in the latter half of 2016, which was much slower than 2015, when Atlanta office landlords saw more than 4M SF leased up by corporate America, according to a fresh year-end office market report by Colliers International.

"It is likely the Atlanta office market has seen its peak absorption level for this cycle in 2015 when 4.5M SF was absorbed," Colliers analysts stated in the report. "Overall activity in Atlanta’s office market is expected to maintain a refined disposition. The metro area will likely average between 1.5M to 2M SF of space absorbed over the next couple of years."

The largest office deals of 2016 were led by the Georgia Department of Transportation's renewal at One Georgia Center in Downtown Atlanta for nearly 300k SF. Other big deals included NCR in Midtown, Troutman Sanders' 230k SF renewal at Bank of America Plaza and HD Supply's Encore Center build-to-suit with Greenstone Properties, according to Colliers.

The expected absorption level is not necessarily bad news. Atlanta office landlords are seeing vacancy rates at 13.7%, the lowest rate since 2007, with Class-A space even tighter.

And even with 4.2M SF of new office underway — a good portion of which is already pre-leased — development is expected to remain in check, unlike in past office cycles, the report states.

"Tighter financing and significant pre-leasing requirements will deter any out of control development," according to the report. "Lenders and developers want to avoid a repeat of the last development cycle here."