Following a strong 2019, all signs point to continued growth in 2020 for Atlanta's office market. Overall market fundamentals appear sound which should secure another year of positive activity.
- The Atlanta office market experienced its best quarter of the year in Q4, leading to net annual absorption of 1.9 million square feet; the best year of gains since 2015.
- North Fulton led the market this year with almost a half-million square feet of absorption in 2019. Top occupancies include a campus expansion of 267,000 square feet by Jackson Healthcare, and also office expansions by McKesson and Delta Dental at Sanctuary Park.
- The overall office vacancy rate in Atlanta showed no significant movement from the prior year as new supply and absorption levels were closely matched.
- Office inventory grew by 2.4 million square feet in 2019; the most space delivered annually in ten years.
- Having achieved yet another record high, Atlanta's overall average rental rate increased 7.6% this year; Class A rents are up 6.6%.
- Following a strong 2019, all signs point to continued growth in 2020. Overall market fundamentals appear sound which should secure another year of positive activity.
Atlanta Office Market
With net absorption reaching almost 1.9 million square feet in 2019, Atlanta's office market had its strongest year of occupancy gains since 2015. Throughout the year activity was positive, driven by a number of large move-ins and expansions.
At the top of the list was Georgia Tech which occupied almost half of the new Coda building in Midtown. The 670,000 square-foot tower delivered in the first quarter and has seen significant traction over the course of the year as it is more than 70% leased and occupied.
Elsewhere, new offices by Northside Hospital, McKesson, and Home Depot accounted for approximately 20% of this year's absorption; and large expansions in the market from Floor & Decor, Serta Simmons, and thyssenkrupp were responsible for another 14% of the total.
Construction activity is at its highest level since 2001, and some are anticipating demand for space to slow in the next 12 to 18 months. Of the 7.5 million square feet being developed, almost half of this space is available. Throw in the amount of second generation space yet to hit the market from companies signing for new offices and the vacancy numbers begin to add up.
All is not dire however, as office demand in the coming year is expected to be strong. According to Moody's the Atlanta MSA is forecasted to gain another 30,000 jobs in 2020, slightly less than this year's total, but still meaningful.
Also, there are a number of large, unannounced requirements floating around the market in the latter stages of completion which, once signed, could significantly alter the landscape of large availabilities and vacancies in the Atlanta office market.