Ofce Market Snapshot

Atlanta Third Quarter 2011

Market Tracker
*Arrows = Current Qtr Trend

Vacancy
21.3%

Net Absorption
198,508 SF

Deliveries
0 SF

Asking Rent
$18.60 FS

Atlanta Ofce Market Slowly Turning the Corner

The Metro Atlanta ofce market posted positive net absorption of 198,508 square feet in the third quarter, bringing the overall vacancy rate down from a record high 21.5% the previous quarter to 21.3%. During this time period, average asking rates continued their decline, from $18.76 per square foot to $18.60 per square foot. While the Class A market has been outperforming the Class B market in recent years, with Class B tenants taking advantage of discounted rates and upgrading to Class A space in a ight to quality, this quarter saw both classes with net occupancy gains and decreasing vacancy rates, indicating a recovery that is gradually expanding beyond core assets. Total leasing activity for the third quarter, while down from this period last year, is up from the previous two quarters. In the urban corridor, the Buckhead submarket is seeing the most signicant improvements. The vacancy rate here has dropped by 5% in the past 18 months and 2% from the previous quarter. Major activity in Buckhead this quarter includes Novelis 25,000 square foot expansion at Terminus 200, Windham Brannons 37,000 square foot relocation from the Central Perimeter and Midtown submarkets to 3630 Peachtree Road, and two major expansions signed by SunTrust Robinson Humphrey for 137,596 square feet and Morris, Manning & Martin for 125,000 square feet, both at Atlanta Financial Center. In Midtown, SunTrust Bank leased 95,000 square feet at Campanile Plaza and will be relocating from Downtown in 2012. In the suburban market, major leases this quarter include AFC Enterprises and Ventyx leasing 55,000 square feet each at Terraces North in Central Perimeter and the FBIs 137,000 square foot renewal at 2635 Century Center in the Northlake submarket. Despite losing 376,000 square feet of occupied space from AT&Ts vacancy at Cobalt Center in Alpharetta, the North Fulton submarket has been steadily improving, with the most leasing activity year-to-date of all suburban submarkets. Total sales volume and the number of transactions was down from the previous two quarters, however total volume this year has picked up and exceeded 2009 and 2010 volumes combined. Major sales in the third quarter include Riverwood 100 in Northwest Atlanta, sold by GE Asset Management to Highwoods Properties for $86,300,000 ($172/ SF), and 100 Peachtree Street in Downtown Atlanta, sold by Capmark Bank to Americas Capital Partners in an REO sale for $19,000,000 ($31/SF). The sale of core assets such as Riverwood 100 in the third quarter and 3344 Peachtree Road earlier this year indicate a renewed condence in the Atlanta market from institutional investors.

ATLANTA OFFICE

Economic Indicators
Q3 11
Atlanta Employment Atlanta Unemployment U.S. Unemployment U.S. CCI 2.24M 10.4% 9.1% 49.93

Q3 10
2.27M 10.4% 9.6% 50.94

Net Absorption
4,000 3,000
Square Feet ('000s)

2,000 1,000 0 -1,000 -2,000 -3,000 -4,000 2006 2007 2008 2009 2010 2011

Vacancy Rate
22% 20% 18% 16% 14% 2006
Historical Average

Forecast
Georgia will add only 3,200 jobs in 2011 while Metro Atlanta will lose 2,300 jobs. In 2012, Georgia and Metro Atlanta will add 46,500 and 32,600 jobs, respectively. Atlanta will see only modest net absorption gains in the coming quarters, most of which will still be concentrated in Class A buildings. Construction levels will remain low, with no new speculative ofce buildings breaking ground in 2011. While heavy concessions are starting to burn off, asking rates will tread along the bottom and not see any signicant improvements until occupancy levels rise considerably.
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2007 2008 2009 2010 2011

Cassidy Turley Ofce Market Snapshot

Atlanta Third Quarter 2011
TOTAL BLDGS SUBLET VACANT DIRECT VACANT VACANCY RATE CURRENT NET AVERAGE AVERAGE YTD NET UNDER ASKING RENT ASKING RENT ABSORPTION ABSORPTION CONSTRUCTION
(ALL CLASSES) (CLASS A)

INVENTORY

Submarket
Downtown Midtown Buckhead Central Perimeter North Fulton Northeast Northlake Northwest South Atlanta West Atlanta 154 138 131 275 427 601 461 576 332 71 21,334,459 17,965,388 19,161,768 25,289,458 22,050,987 21,007,788 16,041,555 30,911,680 9,314,203 2,768,642 331,024 253,529 183,231 258,395 408,014 204,003 97,275 307,661 59,064 0 4,116,523 3,858,746 3,763,392 6,197,909 4,044,952 4,685,921 2,206,764 5,957,109 1,924,412 794,676 20.8% 22.9% 20.6% 25.5% 20.2% 23.3% 14.4% 20.3% 21.3% 28.7% (19,170) 29,864 388,022 (115,065) (155,833) 32,404 71,270 (26,653) (99,323) 92,992 (363,880) (141,662) 677,528 (414,559) 137,576 (106,076) 107,160 26,673 (98,106) 78,045 0 0 0 16,000 0 0 10,000 16,650 0 0 $17.82 $22.71 $23.33 $19.94 $16.85 $15.76 $17.00 $17.90 $16.52 $14.06 $18.93 $24.33 $24.55 $21.70 $19.30 $19.26 $19.61 $20.73 $20.69 N/A

ATLANTA MARKET TOTALS

Class A Class B Class C 406 1,939 821 3,166 94,461,271 73,546,537 17,838,120 185,845,928 1,558,641 520,303 23,252 2,102,196 18,733,199 15,724,436 3,092,769 37,550,404 21.5% 22.1% 17.5% 21.3% 16,596 157,508 24,404 198,508 860,173 (938,118) (19,356) (97,301) 0 42,650 0 42,650 $21.31 $15.57 $13.90 $18.60

TOTAL
Ofce asking rents converted to Full Service

Key Lease Transactions 3Q 11

PROPERTY
Atlanta Financial Center Atlanta Financial Center 2635 Century Center Campanile North Terraces North Terraces

Major Projects in Atlanta

TENANT
SunTrust Robinson Humphrey Morris, Manning & Martin Federal Bureau of Investigation SunTrust Bank AFC Enterprises Ventyx

SF
137,596 125,000 137,000 95,000 55,000 55,000

TRANSACTION TYPE
Renewal/Expansion Renewal/Expansion Renewal New New New

SUBMARKET
Buckhead Buckhead Northlake Midtown Central Perimeter Central Perimeter

Jamestown acquired the 2 million square foot City Hall East building in Midtown this quarter from the City of Atlanta for $27,000,000 ($15,400,000 was paid at closing). Originially home to Sears, Roebuck & Co., the historic building is being rebranded as Ponce City Market and undergoing extensive renovations as part of a mixed-use redevelopment project. Primerica signed a long-term lease agreement this quarter with Duke Realty for a 344,476 square foot build-to-suit facility in Legacy, Dukes 111-acre ofce park in Duluth, where they will be relocating from their current headquarters in 2013. The 600,000 square foot build-to-suit for Cox Enterprises currently under construction in Central Perimeter, which is not included in the inventory of speculative ofce buildings, is scheduled to deliver in 2012.

Bold Text = Cassidy Turley Transaction

Key Sales Transactions YTD

PROPERTY
675 Ponce De Leon Avenue NE Riverwood 100
3344 Peachtree Road 100 Peachtree Street

SF
2,000,000 502,527
484,000 622,301

SELLER/BUYER
City Of Atlanta/Jamestown Properties GE Asset Management/Highwoods Properties
Regent Partners/Parkway Properties Capmark Bank/Americas Capital Partners

PRICE
$27,000,000 $86,300,000
$167,300,000 $19,000,000

SUBMARKET
Midtown Northwest
Buckhead Downtown

Jonathan Gerrard
Research Analyst

About Cassidy Turley

Cassidy Turley is a leading commercial real estate services provider with over 3,000 professionals in 60 ofces nationwide. The rm completed transactions valued over $17 billion in 2010, manages over 430 million square feet on behalf of private, institutional and corporate clients and supports over 25,000 domestic client locations. Cassidy Turley serves owners, investors and occupiers with a full spectrum of integrated commercial real estate servicesincluding capital markets, corporate services, project leasing, property management, project and development services, and tenant representation.

171 17th Street NW Suite 1400 Atlanta, GA 30363 Tel: 404.682.3412 Fax: 404.888.4962 Email: jonathan.gerrard@cassidyturley.com
The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright 2011 Cassidy Turley. All rights reserved.

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