Atlanta Office Rent to Rise Slightly This Year

Atlanta’s office market should see a slight increase in rents this year, despite a significant delivery of new office space and an economy likely to be in downshift mode, according to a report from Jones Lang LaSalle that examines trends in 52 major buildings in Atlanta’s intown submarkets.Rents should increase over the first half of this year, then slow down in the second half, said David Demarest, managing director of Jones Lang LaSalle’s tenant representation team in Atlanta. “Atlanta is a service economy, and it tracks national trends,” Demarest said. Average overall direct rental rates in Atlanta’s CBD reached $22 per square foot at the end of 2007, while asking rental rates for Class A space in Buckhead and Midtown averaged approximately $27 per square foot, according to the report. The market should present some favorable opportunities for tenants, according to Demarest. “Over the next 24 months, tenants have the opportunity to lock in long-term at their existing buildings, or in new buildings, at favorable rates,” he said. Further challenges to landlords will also be presented by new office space that has been delivered, or is now under construction. Over the last 12 months, 2 million square feet has delivered to the Atlanta market, and another 4 million square feet set for delivery by 2009. Many of these new projects are Class A office/mixed-use buildings. Buckhead will be the most vulnerable submarket to the new construction, Demarest said, while he called office development in the Midtown and Downtown submarkets “restrained.” He believes many existing Class A office buildings in Buckhead should see both repositioning and refurbishment, as landlords attempt to make them more attractive to tenants. Over the long-term, Demarest expressed optimism about Atlanta’s economy, and its office sector. He said that while the city now has an oversupply of condominiums, he believes that the evolution of Atlanta’s CBD into a live/work/play environment will strengthen the market. “We’ve seen an urban renaissance over the last ten years,” he said. “Many young workers want to experience an urban lifestyle, and Atlanta is as good as any city in the Southeast to experience that.”