Second quarter 2005 office data reflect an encouraging and steady, if unspectacular, improvement in the office market, posting 203,605 square feet of positive absorption. This fifth consecutive quarter of positive absorption contrasts sharply with the negative results recorded in the early years of the decade. The leading submarkets for the second quarter in ffice
absorption were I-285/GA-400 at 116,000 square feet, Midtown at 110,000 square feet, and Peachtree Corners with 47,000 square feet.
Total available square footage declined by more than 400,000 square feet in 2005’s second quarter. In addition to the positive absorption, 256,000 square feet of space was taken off the office market for conversion to residential use, including 1100 Ashwood containing 125,500 square feet, The Peach with 68,300 square feet, and several smaller buildings in Perimeter Center as part of a larger residential land assemblage. The positive absorption, reduction in space, and the lack of new deliveries improved the office numbers, with overall occupancy increasing to 82.8 percent from first quarter occupancy of 82.5 percent. Market-wide average rental rates increased from $20.26 per square foot in the first quarter to $20.33 per square foot in the second quarter. Urban corridor rates increased slightly from the first quarter to the second, moving from $22.92 to $22.98, and suburban rates climbed from $18.99 to $19.08 in the second quarter.
As has been the case for the last several quarters, the suburban submarkets outperformed the urban corridor, with 526,188 square feet of positive absorption as compared to 92,783 square feet of negative absorption in the urban corridor. Nonetheless, the urban corridor maintains a higher occupancy rate at 83.7 percent as compared to the suburbs’ 82.4 percent. In addition, average rental rates along the urban corridor remain significantly higher at an average of $22.98 per square
foot as compared the suburbs at $19.08 per square foot.
Unfortunately, few major corporations are hiring aggressively, and most of Atlanta’s employment growth has come from small to medium-sized entrepreneurial firms. With an improving economy and only 500,000 square feet of deliveries scheduled over the next twelve months, the office market should continue to rebound. We still expect significant improvement in rental rates and occupancy for the remainder of 2005 through both positive absorption and the redevelopment of older, less dense office development projects into alternative uses.
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