Fueled by corporate relocations and less speculative development than previous real estate cycles, metro Atlanta’s asking rents for office space continue to climb, according to newly released local data.
For the past year, asking rates are up 8 percent for metro Atlanta’s class A office buildings, and almost 11 percent for those in the central business district, according to Jones Lang LaSalle.
Midtown is outperforming all other neighborhoods. Direct vacancy has dropped to less than 9 percent — lowest since the first quarter of 2001. Class A rents have jumped 13 percent over the past year.
Those trends are worth watching. Buckhead’s trophy buildings, such as Three Alliance, still boast the city’s highest office rates, but Midtown’s premier properties are closing the gap, according to JLL. Midtown has seen more expansions and relocations than other neighborhoods — Anthem Inc., NCR Corp., Kaiser Permanente. It’s a leading candidate for Amazon’s HQ2. And, it has two projects — Ponce City Market and Coda — that are getting some of the highest rental rates in the city.
The first quarter was defined by strong leasing activity, with more than 1 million square feet of deals. That includes Atlanta staffing company Insight Global’s decision to anchor Trammell Crow Co.’s Twelve24, its new 16-story project by Perimeter Mall and the Dunwoody MARTA station.
Insight Global will occupy more than half of the project — one of the largest office leases in metro Atlanta during the past year. It’s yet another sign that more companies, from Midtown to the parts of the Atlanta suburbs served by MARTA rail, are moving their headquarters and regional offices to projects where employees have options to walk, bike, or ride the train.
Projects close to MARTA and the Beltline are seeing some of the greatest rent increases. But, rent growth isn’t limited to those areas. In fact, asking rents continue to rise essentially everywhere, in both class A and B properties, according to Transwestern.
Overall vacancy rose slightly from 16.1 percent to 16.2 percent largely because of unleased space in the newly completed 4004 Perimeter Summit, according to Transwestern.
Something to watch is the amount of sublease space coming onto the market, along with effective rents, or those that factor in landlord concessions.
More than a dozen cities including Charlotte (+1.6 percent), Boston (+1.5 percent), and Dallas (+1.1 percent) saw at least 1 percent effective rent growth from the end of 2017 through the first quarter, according to the analyst Reis. At 0.8 percent, Atlanta compared well, ranking No. 18 out of 79 metros in effective rent growth during that period.
Atlanta’s first quarter vacancy rate was less impressive. At 18.8 percent, it was higher than the average of the 79 metros, according to Reis.
Vacancy increased in 41 of those cities. Since the first quarter of 2017, 46 metros show an increase. However, the expected increase in vacancy these markets see is not expected to exceed 1 percent, as job growth should remain healthy and fuel office demand.
Exterior of the Vero Biotech building.
A Florida biopharma company is moving its headquarters to Atlanta
Vero Biotech will relocate from Cocoa, Fla., to Georgia Tech’s Technology Enterprise Park, where it will occupy Building One at 387 Technology Circle. It will eventually put more than 100 employees at the new headquarters and plans to add at least 40 positions over the next year.
Vero Biotech, formerly GeNO LLC, designs, develops, and commercializes inhaled nitric oxide products for patients with cardiopulmonary conditions.
Brent Furse, president and CEO of Vero Biotech, said moving to Atlanta gives the company access to a growing biotech community, a highly skilled workforce, and an innovation support system. It will begin relocating to Atlanta during the next six to 12 months.
The company will be recruiting software developers, engineers, and sales and marketing positions, said CFO Marc Morin.
Russell Allen, president and CEO of Georgia Bio said, Vero Biotech helps position Atlanta as one of the leading global bioscience hubs.
Chad Koenig and Ben Jackson of Cushman & Wakefield represented Vero Biotech in the 15,585-square-foot lease. Enio Guerra and Dick Bowers of Richard Bowers & Co. represented the landlord.
In recent years, Georgia Tech has worked to expand its Technology Enterprise Park to include a cluster of research buildings on North Avenue and surrounding properties.