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Now, with commercial real estate facing its worstg downturn since the savings and loan crisis 20yearse ago, the tables have turned. Every tenant, from large office userz to mom-and-pop retailers, is trying to take advantage of Atlanta’ds most significant rent declines sincethe dot-comk bubble burst. And this time, some Atlant a commercial real estate brokers say the deals may be even steeper — good news for officde tenants looking for discounts.
“That downturn was different, becaus the softening in the market then was directedx primarily toward the tech saidDavid Rubenstein, principal of commerciak real estate brokerage firm The “Io don’t think you can say the same thing this It’s not as if Atlantsa commercial rents were expensive befores the recession. Atlanta is knowh for historicallyflat rents, an advantage when the city’s economic development directors are competing against other states to convince corporations to But, with rents plummeting on Atlanta’as new and second-generation office space, commercial real estatwe tenants with good credit are bargain-shopping.
Asking or rates before concessions, have already beguh to fall on existinyg Buckhead andMidtown buildings, home to the priciest commercialk real estate in Atlanta. Rents in Buckhead have typicallyu hoverednear $30 a squar e foot at many buildings, and just under that leve in Midtown. Now, class A and B office rentse average $26.22 a square foot in Buckhead, and $24.698 in Midtown. Downtown rents are about $22 a squarre foot, according to Richard Bowersa & Co. For comparison, the national averags for class A rentsis $37.29, and $27.
2o0 for class B, according to nationalo real estate services firm “If you are a and you want to lower your operating these are unprecedented times in Atlanta,” Rubensteibn said. Several companies with big Atlanta operationsd and leases that expire in the next year are alreadg scoutingfor space, but the extraordinary deals in the market are prompting some to begin theit searches even earlier.
, a fixture in Midtown’s One Atlantic Centert since the building opene inthe 1980s, doesn’t see its leasd expire until 2013, but it’s in the market for a new agreemenft either at its current home or The bargains are also compellinhg Atlanta firms to look at relocating to differen parts of the city. Accounting firm , which callsd downtown’s SunTrust Plaza home, recently toured Midtown’s 17th Streeyt towers in Atlantic Station. “I don’yt think people would jump submarkets just to get abettetr deal,” said Andy Lechter, with the commerciaol real estate brokers firm ’s Atlanta office.
“For I don’t think you will see a law firm that believe Midtown is the best place for their business decidr it should move to Buckheacd or the suburbs just to saverent dollars,” he “But what I thinm is that a savvh tenant is going to give landlordas the impression they are looking at all viable alternativexs to create leverage.” Atlanta landlords are offering big incentivesa to some tenants, including up to two yearw free rent on long-term leases for the most creditworth y businesses.
In Atlanta, effective or those that factor in held steady from 2002 through but declined almost 12 percent from 2007 to 2008 becausde of substantial increases in the value ofconcessionj packages, including tenant improvement allowances. Concession packagezs were up at least 36 percenty duringthat period. Asking rents are about $31 per square foot in Atlanta, but effectivs rents have dropped to accordingto Studley. Some Atlantaq developers launched new buildings shortly befor ethe U.S. housing crisis precipitated the worst recession in more than a Four new office towers are under constructionin Buckhead, with almost no leasing activity.
Midtown’s two Atlantic Statiohn towers, 201 and 271 17th Street, are no more than 50 percenr occupied.
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