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National Real Estate Investor
January 1, 2007

Office Construction Mounts
By Jarred Schenke

Excerpt:
Some historical context

One hallmark of the Atlanta commercial real estate industry is that when things look up, developers race to break ground on new product. “[Still], the exuberance this time is more managed than it was in the past,” says Tad Leithead, senior vice president at Cousins Properties, a diversified REIT. Cousins is developing the Terminus 100 office tower in Buckhead, a 650,000 sq. ft. building that is already two-thirds leased, and has plans for a second building next door.

“If you take the new development as a whole, there is a significant amount of pre-leasing in these projects and [companies are absorbing more space] then just churning the market,” Leithead says. As major tenants jump from older towers to newer towers, they tend to take bigger chunks of additional space.

Cousins spotted the recovery trend in Buckhead, the financial district north of downtown. And the numbers corroborate the firm's intuition. Research firm Dorey considers the Buckhead submarket to be much healthier than the rest of the metro Atlanta office market with a 15.8% vacancy rate in the third quarter of 2006 compared with nearly 20% for the metro area.

Much of the office development activity, however, has occurred in the CBD. Regent Partners, for example, is constructing a 50-story, mixed-use tower scheduled for delivery by April 2008. Developers hope that several other projects in the planning stages will break ground in the future.