During the second half of 2009, three medical office buildings totaling 93,840 square feet were completed; N Cobb at Mars Hill Rd with 18,000 square feet is 33% leased, 684 Sixes Road with 60,000 square feet is 53% leased and 2575 Peachtree Pkwy with 15,840 square feet is 43% leased. Net absorption in the 3rd quarter 2009 was negative 108,831 square feet which was offset by a positive 57,362 square feet in the 4th quarter. The Northlake submarket experienced net negative absorption of 31,344 while the Northwest market had a positive absorption of 42,424. For all 2009 net negative absorption of 138,824 was the first year since the yearly 2000’s that there was less occupied space from beginning to the end of the year. Even with positive fourth quarter absorption, the year end 2009 vacancy rate of 18.9% was a over 2.4 percentage points higher than year end 2008 of 16.5% and the highest vacancy rate recorded in our data. We do anticipate the recent demand to continue, creating additional positive absorption and with vacancy rates declining to 18.5% in 2010.
Average quoted rental rates reached a historical high of over $22.30 per square foot in 2008. By mid year 2009 with increasing vacancies, rental rates had fallen by approximately $1.00 per square foot. By year end rates have rebounded to $21.80 per square foot. Central Perimeter had the highest quoted rates of $25.30 per square foot followed by North Fulton and Buckhead of $24.10 and $23.80 per square foot. We anticipate quoted rental rates to remain stable through 2010 with effective rates including concessions to be lower by approximately 10% to 20%. Rental rates can vary widely based on building quality, location, amenity base, access and tenant mix. In addition, some properties quote rental rates on a full service basis, which includes operating expenses. Others quote rates net of expenses where the tenant pays separately for utilities, taxes, building insurance, janitorial and common area maintenance, which can add $7.00 to $9.00 per square foot to the lease rate. Be mindful to compare like kind quoted rates.
Recent, notable leases include: Walton Regional Medical Center (15,242 SF, 3869 Highway 81, Loganville), Rosa of Georgia (13,292 SF, 2745 DeKalb Medical Pkwy, Lithonia), Undisclosed (9,808 SF, 1800 Howell Mill Road, Atlanta), Georgia Cancer Specialists (9,000 SF, 132 Old Norton Road, Fayetteville), Tri County Pediatric (7,500 SF, 193 N Park Tri, Stockbridge), Total Renal Care (7,342 SF, Rockbridge Medical Plaza, Conyers), Buckhead Radiology Associates (6,075 SF, The Palisades Medical Office, Atlanta) and Shepherd Center Inc., (3,252 SF, 2045 Peachtree Road, Buckhead) among others. We anticipate an up-tic in activity through 2010 brought on by more aggressive landlord deals offering lowered rates and increased incentives.
For a complete report of supporting data and/or request a market study for areas not yet reported on this blog please give us a call or email Richard Smith, CCIM. We can also provide complete full market research studies including available spaces, lease rates, operating expenses, sales comparables and tenant rosters on medical office buildings across the Southeast Region. We work with health care professionals evaluating real estate options.
