Piedmont Real Estate Group
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David Hacker david.hacker@piedmontcap.com
Jeff Pittman jeff.pittman@piedmontcap.com
Metro Market Report – Northern Suburbs
Piedmont Real Estate Group presents the following office market report for the third quarter of 2018. The information in this report is focused on market conditions in Cherokee County, East Cobb, the Kennesaw/Town Center area and North Fulton/Forsyth County. The information provided comes from Costar’s submarket reports and other services that we subscribe to.
Office fundamentals are strong for existing assets with increasing rents but land costs and new construction costs are high, which is limiting new office development except for large Class A office buildings or for user specific needs.
Of particular note is the overall vacancy rates in these four submarkets. Three of the four submarkets are remarkably healthy, with all three below 10% vacancy with only the Fulton/Forsyth market edging above that number to 11.5%. This submarket is the most volatile of the four, with the highest inventory of Class A space, and historically sees more competition against the Perimeter submarket.
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Cherokee County Office Submarket
Leasing Indicators:
- 12 Mo Deliveries in SF – 36 K
- 12 Mo Net Absorption in SF 40.3 K
- Vacancy Rate 5.4%
- 12 Mo Rent Growth 2.4%
| Current Quarter |
RBA |
Vacancy Rate |
Gross Asking Rent |
Availability Rate |
Net Absorption SF |
Deliveries SF |
Under Construction |
| 4 & 5 Star |
345,918 |
10.8% |
$28.07 |
11.3% |
0 |
0 |
12,841 |
| 3 Star |
1,695,883 |
6.8% |
$18.24 |
9.0% |
(8,951) |
0 |
0 |
| 1 & 2 Star |
1,977,509 |
3.1% |
$14.83 |
4.4% |
7,234 |
0 |
0 |
| Submarket |
4,019,310 |
5.4% |
$17.44 |
7.0% |
(1,717) |
0 |
12,841 |
Sale Comparables :
- Cap Rate 52 – 8.7%
- Price/SF $163
- Vacancy At Sale 5.1%
East Cobb Office Submarket
Leasing Indicators:
- 12 Mo Deliveries in SF: 0
- 12 Mo Net Absorption in SF: 6 K
- Vacancy Rate: 3%
- 12 Mo Rent Growth: 6%
| Current Quarter |
RBA |
Vacancy Rate |
Gross Asking Rent |
Availability Rate |
Net Absorption SF |
Deliveries SF |
Under Construction |
| 4 & 5 Star |
277,000 |
0% |
$27.47 |
0% |
0 |
0 |
0 |
| 3 Star |
1,043,332 |
6.1% |
$19.98 |
11.4% |
(3,718) |
0 |
0 |
| 1 & 2 Star |
2,084,626 |
7.2% |
$15.04 |
8.6% |
28,727 |
0 |
0 |
| Submarket |
3,404,958 |
6.3% |
$17.57 |
8.7% |
25,009 |
0 |
0 |
Sale Comparables
- Cap Rate : 9.0%
- Price/SF: $103
- Vacancy At Sale: 10.8%
Kennesaw / Town Center Submarket
Although I-75 forms the spine of the Kennesaw/Town Center Submarket, its relatively far-flung location limits accessibility from other parts of Atlanta compared to more established office nodes. Some of the largest office users here include a Home Depot call center, CarMax Auto Finance, and Enercon Services, Inc., but leases over 50,000 square feet are rare.
The submarket has a low concentration of 4 & 5 Star office buildings, which keeps average rents lower than the metro. However, Kennesaw/Town Center does have one of the largest concentrations of healthcare-related employment in the metro, and the medical office share of the total inventory here (nearly 20%) is more than double the metrowide benchmark. Much of that space is centered on WellStar’s Kennestone and Cobb hospitals. With demand drivers for medical space, below-market rents, and a lack of new development this cycle, vacancy is well below the metro average. These fundamentals have attracted some institutional investment as of late, and 2017 saw investment volume quadruple historical averages.
Leasing Indicators:
- 12 Mo Deliveries in SF : 8 K
- 12 Mo Net Absorption in SF: (56.1 K)
- Vacancy Rate: 4%
- 12 Mo Rent Growth: 0%
| Current Quarter |
RBA |
Vacancy Rate |
Gross Asking Rent |
Availability Rate |
Net Absorption SF |
Deliveries SF |
Under Construction |
| 4 & 5 Star |
1,612,472 |
4.6% |
$27.09 |
6.7% |
0 |
0 |
0 |
| 3 Star |
4,613,162 |
11.9% |
$18.95 |
17.9% |
(70,102) |
0 |
0 |
| 1 & 2 Star |
5,662,326 |
6.6% |
$15.03 |
8.4% |
4,582 |
0 |
0 |
| Submarket |
11,887,960 |
8.4% |
$18.19 |
11.9% |
(65,520) |
0 |
0 |
Sale Comparables:
- Cap Rate: 8.2%
- Price/SF: $241
- Vacancy At Sale: 6.4%
North Fulton / Forsyth County Office
The North Fulton/Forsyth County Submarket is one of the most premier suburban office nodes in Atlanta, surrounded by affluent communities like Alpharetta and Johns Creek. It is the largest office submarket in the metro and was also one of the fastest growing until this cycle. But North Fulton has experienced limited construction since 2009, as significant deliveries really just returned in 2017. Vacancies have continued to tick higher over the last three years, while 18Q3 marked several notable move outs. Both State Farm and Comcast vacated 100,000 SF+ blocks of space as they moved to new offices closer in-town.
Despite rising vacancy, rent growth has remained healthy, on par with the metro average at 2.9%. Asking rents trail the metro average, and the submarket is much more affordable compared to the premier office nodes of Buckhead and Midtown. Investors have found much to like, as investment volumes are more than double historical averages.
Leasing Indicators:
- 12 Mo Deliveries in SF: 434K
- 12 Mo Net Absorption in SF: 1 K
- Vacancy Rate: 5%
- 12 Mo Rent Growth: 9%
| Current Quarter |
RBA |
Vacancy Rate |
Gross Asking Rent |
Availability Rate |
Net Absorption SF |
Deliveries SF |
Under Construction |
| 4 & 5 Star |
14,337,962 |
12.5% |
$28.02 |
17.6% |
31,580 |
0 |
788,308 |
| 3 Star |
14,673,732 |
12.3% |
$20.45 |
14.9% |
58,790 |
38,500 |
41,800 |
| 1 & 2 Star |
8,244,650 |
8.4% |
$15.75 |
9.7% |
(13,525) |
0 |
0 |
| Submarket |
37,256,344 |
11.5% |
$22.44 |
14.9% |
76,845 |
38,500 |
830,108 |
Sale Comparables:
- Cap Rate: 8.8%
- Price/SF: $149
- Vacancy At Sale: 14.0%
