Rent growth in Atlanta continues to slow, thanks to weakness in the middle market of 3 Stars, but growth remains well above the historical average. The metro’s core in-town submarkets are still seeing substantial growth. Midtown, Buckhead and Central Perimeter as still registering rent growth well above 3%.
One of the biggest winners of late has been Downtown, thanks in part to an actual decline in net inventory as some high-vacancy projects have been converted to other uses. There is rising momentum being generated from the redevelopment of Underground Atlanta and the purchasing binge that Newport US RE has undertaken in anticipation of their redevelopment of about three dozen downtown buildings. In a surprising announcement, CIM Group out of Los Angeles has won approval for its massive proposal for over nine million SF of office at The Gulch site; significantly impacting the submarket’s cool factor and rents. With rents in neighboring Midtown/Pershing Point some of the most expensive in the metro, Downtown offers a value-play for proximity to Midtown’s amenities.
With nearly 90% of the ground-up office builds this cycle constituting 4 & 5 Star projects, and another 90% of the under construction pipeline, supply continues to accrue to the high-end. Supply naturally increases vacancy at this level, yet rents continue to climb in the face of increasing vacancy.