In Atlanta's Buckhead, Vacant Office Towers Set Off Battle For Tenants
March 10, 2010
By Maura Webber Sadovi

Few of the country's office markets are as competitive as Atlanta's upscale Buckhead neighborhood, where the owners of four new and largely vacant office towers are locked in a bruising battle for tenants. ...

... Back when the developers of the new Atlanta buildings were penciling out their finances, landlords were offering just six months of free rent, interior work worth less than $50 a square foot and rents starting in the mid-$30 range, according to Andrew Lechter, executive vice president and branch manager in Atlanta with Studley Inc., a real-estate services firm that specializes in representing tenants.

But Atlanta's office market tanked and Phipps Tower had little choice if it wanted to lure Speakeasy. "If Phipps Tower didn't do the deal then somebody else would," says Mr. Lechter, who wasn't involved in the Speakeasy lease negotiations. "It's an ugly time to be a landlord." ...

... Landlords are in a tough spot because Buckhead's prime office market had a 35.3% vacancy rate as of the fourth quarter, compared with about 21% five years ago, according to Studley. Nationally about 20.2% of the country's high-end office space is vacant, a rate that includes space available for sublease, according to Studley. The new supply has come as the financial sector, a key generator of Buckhead tenants, is still recovering from the financial crisis and recession.

As a result, landlords are digging deeper to offer better concession packages such as longer rent-free periods, Mr. Lechter says. Owners are less flexible on the rental rates themselves, because those are key to refinancing or selling a property down the road, Mr. Lechter says. ...

... Mr. Weiss acknowledges one perk for first movers. "We won't have to make many stops on the elevator," he quipped.

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