Year End 2018 Office Report

Sales volumes, values and rents for the Metro Atlanta Office Market reached new highs in 2018 while vacancies continued to decline. Below is a quick summary of the 2018 stats as compiled by Crossroads Appraisal Group from information obtained from CoStar. If you would like a PDF version of the information below, it is available here for your convenience.

SUPPLY

A total of 16,598 office buildings were identified in metro Atlanta housing about 315.6 million square feet. Supply has been increasing each year since 2012 in terms of square feet with number of buildings declining in 2015 and 2016 as a result of redevelopment projects.  However, 2018 has seen a significant increase in new buildings delivered as rents are once again supporting new construction in some markets.

VACANCY TRENDS

Vacancy rates trended down sharply from 2012 to 2015 and continue to trend down but at a much more modest pace. The stabilization of the vacancy rate is more a result of new construction and not a market slow down.

ABSORPTION, DELIVERIES & UNDER CONSTRUCTION

Of slight concern is the fact that construction began outpacing absorption in 2016, a trend that continued through 2018.

TRANSACTION VOLUME

Sales activity in the market has generally trended up with 2018 recording the seven year high after a pullback in 2017.

VALUATION HISTORY

Values generally trended upward from 2012 to 2016, while cap rates were compressing. 2017 recorded a slight pullback in values, but 2018 has seen a rebound exceeding 2016 values and breaking through the $160 per square foot market with cap rates once again compressing.

RENT TRENDS

Rents have been trending positive since 2013 and continue to grow despite new construction ending 2018 just below $25.00 per square foot.

CONCLUSION

The post recession high in most of the performance indicators for the metro Atlanta office market was in 2016 with 2017 still strong but indicating a slight cooling off as cap rates increased and values declined. However, 2018 rebounded nicely outperforming 2016. Overall, new construction is a concern in some markets but most market participants are optimistic about 2019 for the metro Atlanta office market.

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