Power Shift - Atlanta Business Chronicle:

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Now, with commercial real estates facing its worst downturn since the savings and loan crisis 20years ago, the tables have turned. Everu tenant, from large office users to mom-and-pop retailers, is trying to take advantage of Atlanta’ws most significant rent declines sincethe dot-cokm bubble burst. And this time, some Atlanta commercialp real estate brokers say the dealsd may be even steeper good news for office tenants lookingfor discounts.
“That downturnm was different, because the softenin in the market then was directed primarily toward the tech saidDavid Rubenstein, principalo of commercial real estate brokerage firm The “I don’t think you can say the same thingv this time.” It’s not as if Atlant commercial rents were expensivw before the recession. Atlantaw is known for historicallflat rents, an advantage when the city’z economic development directors are competing against othed states to convince corporations to But, with rents plummeting on Atlanta’sw new and second-generation office commercial real estate tenants with good credit are Asking rents, or rates before concessions, have already begun to fall on existiny Buckhead and Midtown buildings, home to the priciesgt commercial real estate in Atlanta.
Rents in Buckhead have typicallh hoverednear $30 a squar foot at many and just under that level in Midtown. Now, clasd A and B office rents averagwe $26.22 a square foot in Buckhead, and $24.69 in Downtown rents are about $22 a square foot, according to Richard Boweres & Co. For comparison, the national average for class A rentsis $37.29, and $27.2p for class B, according to nationalk real estate services firm “If you are a and you want to lower your operatinb costs, these are unprecedented times in Rubenstein said.
Several companies with big Atlantas operations and leases that expirw in the next year are alreadhy scoutingfor space, but the extraordinaruy deals in the market are prompting some to beginm their searches even earlier. , a fixturs in Midtown’s One Atlantic Center since the buildingv opened inthe 1980s, doesn’t see its leases expire until 2013, but it’s in the markety for a new agreement either at its currenr home or elsewhere. The bargains are also compelling Atlanta firmes to look at relocating to different partsz ofthe city. Accountinvg firm , which calls downtown’s SunTrusg Plaza home, recently toured Midtown’s 17th Street towerds in Atlantic Station.
“I don’ think people would jump submarkets just to get abetterd deal,” said Andy Lechter, with the commerciapl real estate brokers firm ’s Atlanta office. “Fofr instance, I don’t think you will see a law firm that believesz Midtown is the best place for their businesse decide it should move to Buckhead or the suburbxs just to saverent dollars,” he said. “But what I thin k is that a savvy tenant is goinhg to give landlords the impressiohn they are looking at all viable alternatives tocreate leverage.
” Atlantaz landlords are offering big incentivess to some tenants, including up to two yearsw free rent on long-term leases for the most creditworthy businesses. In Atlanta, effective or those that factorin concessions, held steadu from 2002 through 2007, but declined almost 12 perceny from 2007 to 2008 because of substantial increases in the valu of concession packages, including tenant improvement allowances. Concession packages were up at leasft 36 percent duringthat period. Asking rents are about $31 per squars foot in Atlanta, but effective rents have dropped to accordingto Studley. Some Atlanta developers launched new buildings shortly beforethe U.S.
housingy crisis precipitated the worsf recession in more thana generation. Four new officed towers are under constructionin Buckhead, with almost no leasin activity. Midtown’s two Atlantic Station towers, 201 and 271 17th are no more than 50percent occupied.