"The major trend that we're seeing in Atlanta office development is caution," says Dale Karrh, senior vice president of Carter & Associates. "In the past, Atlanta has faced a market slowdown due to overbuilding by the development community. Currently, the slowdown in the market is being driven by a lack of demand, due in part to the impact of space vacated by dot-com companies, and even more recently the uncertainty of companies such as Arthur Anderson, WorldCom and Xerox. For many companies, the abundance of sublease space can prove to be more economically favorable than anchoring new multi-tenant buildings."

Some new development is taking place, particularly in the Central Perimeter and North Fulton submarkets. According to CoStar's preliminary second quarter statistics, almost 1 million square feet is currently under construction in the Central Perimeter market. Developments in the area include One Glenlake, a 353,000-square-foot building that is being developed by Pope & Land and is currently 56 percent leased. Doctor's Center Four, a 208,000-square-foot facility, is being developed by Carter & Associates and is approximately 50 percent leased. Hines is developing Perimeter Summit, a 427,458-square-foot building that is currently 10 percent leased.

In North Fulton, approximately 643,000 square feet is scheduled to come on line, including Sanctuary Park, a 225,000-square-foot speculative office building being developed by Jones Lang LaSalle. Additionally, two other buildings totaling approximately 418,000 square feet, ChoicePoint and Parkview IV, are under construction in North Fulton. Parkview IV is 100 percent leased, while ChoicePoint is 50 percent leased.

"We're seeing a multitude of larger tenants that are in the market for space simply to take advantage of the tenant's market and capitalize on market conditions," Karrh notes. The softer market has prompted several companies, including Powell, Goldstein, Frazer & Murphy and King & Spaulding, to come out with space requirements well in advance of their lease expirations. Additionally, Norfolk Southern, which first issued a request for proposal seeking 500,000 square feet in January of 2000, continues its search for space. In terms of larger leases that were recently signed, EDS recently leased 75,000 square feet at Sanctuary Park and Six Continents has signed a lease for approximately 67,000 square feet of space at Great Oaks Center.

According to CoStar, average quoted Class A rental rates in Atlanta can range from $25 per square foot in the Buckhead, Midtown and Central Perimeter areas to $20 per square foot in Downtown and North Fulton. The lowest quoted rate was the Northeast Atlanta submarket, which came in at a little under $19 per square foot.

For Class A space, according to CoStar, the vacancy rate can range dramatically. Buckhead and Central Perimeter hover between 18 and 20 percent, while Midtown remains at 24 percent, North Fulton at 29 percent and Northwest Atlanta at 17 percent. Downtown is at 13 percent and Northeast Atlanta remains at 25 percent.

Buckhead should be the submarket to watch once the market begins to rebound. The prestige of a Buckhead address, along with the ideal location, makes Buckhead a great option for so many companies.

Dale Karrh is senior vice president of Carter & Associates in Atlanta.


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