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First-Quarter Collapses: Bridges, The Falcons And The Office Market

WASHINGTON DC 05.08.2017

MONTGOMERY COUNTY STATE OF THE MARKET

Featuring an Interview of Marriott CEO Arne Sorenson

Arne Sorenson -- Marriott International
Mike Gill -- The State of Maryland
Barry Glassman -- Glassman Wealth Services

Atlanta has had its share of collapses during the first quarter of 2017: The Interstate 85 bridge. The Atlanta Falcons loss to the New England Patriots after blowing a 25-point lead for the first half of Super Bowl LI. And now, the Atlanta office market.

First-Quarter Collapses: Bridges, The Falcons And The Office Market
Atlanta saw a big loss in Class-A absorption partly due to Coca-Cola's move back downtown.

Atlanta office landlords saw absorption go negative by nearly 140K SF across the metro area, the biggest quarterly dip in absorption since the beginning of 2011, according to a recent report by Colliers International. Suburban Atlanta took the biggest hit in absorption during the first quarter, with a more than 188K SF loss in North Fulton and a nearly 210K SF loss in the Northwest office submarket.

The net result left the overall metro office vacancy rate relatively unchanged at just shy of 14%. But Colliers officials noted in the report that much of this loss was largely expected: Coca-Cola leaving more than 322K SF at 2500 Windy Ridge as the soft drink giant consolidates its operations at its Atlanta headquarters building.

Colliers added the first quarter could very well be the lull before the boom.

“The negative absorption in the first quarter is no alarm to the overall conditions in Atlanta’s office market,” Colliers officials stated in the report. “For second quarter, positive absorption will return, possibly reaching the 1M SF mark if anticipated occupancies occur. Demand in the market remains high as numerous prospects scout the market.”

The biggest office deals of the quarter included Jackson Healthcare's expansion to 267K SF at 2655 Northwinds Parkway in North Fulton, Aaron's headquarters move into nearly 180K SF at 400 and 500 Chastain Center in Northwest Atlanta, and CBRE's 105K SF lease with Tishman Speyer to move into the newly completed Three Alliance Center in Buckhead.

Buckhead's Class-A office market commanded the strongest rent growth as well, up 5.8% to more than $34/SF, according to the report.

First-Quarter Collapses: Bridges, The Falcons And The Office Market
List of office projects underway in Atlanta so far this year

While leasing looks to bounce back through the second quarter, Colliers noted that vacancies likely will not move downward as new office buildings set to deliver during the period will likely match leasing deals.

“Over 1.2M SF of new space is expected to come online next quarter," the report states. "This will be the highest amount of quarterly inventory added in seven years.”

Related Topics: Colliers, Buckhead