Office Space Market Tightens
Midtown still has vacancies, but rents are rising and landlord concessions are shrinking in Buckhead
It's been a tenants' market for Class A office space since the recession but the market is starting to tighten up, according to a report on national law firm office space from real estate brokerage Jones Lang LaSalle.
Rents are going up and landlord concessions are diminishing as the Class A market favored by law firms slowly absorbs excess capacity, a trend that will continue into 2014 and 2015, the report says.
In Atlanta, vacancies have diminished in the Buckhead submarket but there is still plenty of space available in Midtown, which has the city's largest concentration of law firm tenants, said Ian Henderson, a senior managing director at Jones Lang LaSalle.
"I would not say things are tightening up as far as options," he said. "But landlords are less giving of concessions than a year ago."
Henderson said Midtown landlords are "still generous but not as generous" as far as free rent, tenant improvement packages and moving allowances.
"It's still a very favorable market in Midtown," Henderson said, noting that asking rents have not increased from a year ago.
The environment in Buckhead is different, he said, because there is far less vacant space.Landlords are getting actual rents that are close to their asking rents, he said, estimating that the concessions they're offering are only about 30 percent of those in Midtown.
The average asking rent for Class A space in Buckhead is $26.97 per square foot, slightly higher than the $26.75 per square foot in Midtown, according to research from Studley, another real estate brokerage.
One reason for the higher Midtown vacancy rate was the opening of 1075 Peachtree in 2010, part of Daniel Corp. and Seelig Enterprises' 12th & Midtown project, which added 725,000 square feet of Class A space. Seyfarth Shaw and Fisher & Phillips are law firm tenants in the building, which is almost entirely leased.
Several tenants moved to 1075 Peachtree from other Midtown buildings, but tenants from other submarkets have not moved to Midtown to absorb the vacancies, Henderson said.