The Atlanta economy continued to post healthy job growth throughout 2016. The Atlanta metropolitan area (metro Atlanta) has added 67,200 non-farm jobs since the start of the year according to the US Bureau of Labor Statistics. As a result of overall employment gains, the unemployment rate for metro Atlanta dropped to 4.8 percent in November, a 0.1 percentage point decrease year-over-year. In terms of the office-using sectors, employment grew 2.8 percent year-over-year, and continues to boost demand for office space throughout metro Atlanta.
The fourth quarter of 2016 experienced steady growth in several key areas. Overall average asking rental rates in metro Atlanta increased slightly to top the previous quarter’s record. Average asking rates finished the year at $23.39 per square foot (psf), breaking the third-quarter record of $23.38 psf. Average asking rates in Buckhead are the highest in the city at $32.17, with a vacancy rate of 12.4 percent.
Overall vacancy in the fourth quarter totaled 15.8 percent, the same as the previous quarter, however leasing activity continued with 264 leases signed totaling 1.9 million square feet. This brought the year’s total to 8.3 million square feet of leasing activity. The Class A market experienced the second-largest number of leases signed during 2016 with 609, but captured the most overall square footage at 5.4 million square feet. Conversely, Class B leases totaled 622 leases for 2.7 million square feet.
In terms of overall occupancy gains, the fourth quarter experienced 344,563 square feet of net absorption, leading to 1.5 million square feet of overall net absorption for 2016. New-construction deliveries were low in the fourth quarter with the completion of one building totaling 60,262 square feet at 2300 Defoor Hills Road in Midtown. For 2016, four projects were completed totaling 504,983 square feet, all of which were speculative.
Leasing activity saw a slight decline compared to 2015, with a year-end total of 8.3 million square feet (MSF). The most notable new lease during the quarter was signed by Anthem at Bank of America Plaza where they will be taking almost 150,000 square feet.
Coda Tech Square in Midtown, which broke ground in December, is the largest spec office project under construction at 760,000 square feet, followed by the 500,000-square-foot Three Alliance in Buckhead, which is expected to be completed during the first quarter of 2017. Overall, 4.0 million square feet of office space is under construction, 1.7 million square feet of which is pre-leased.
During much of 2016, quality office space available for lease continued to become more scarce as the vacancy rate continued to drop, finishing the year at 15.8 percent. During 2017, the office market will finally get some relief as almost 3 million square feet of newly constructed speculative office space is expected to deliver. These developments include the 500,000 square foot Three Alliance Center, the 355,000 square foot 4004 Perimeter Summit, and the 300,000 square foot Riverwood 200. Even though the new deliveries will give the Atlanta market more options, companies such as Global Payments, Delta Community Union, and Synovus Bank have preleased almost half of the space.
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