According to the Bureau of Labor Statistics, the unemployment rate rose 0.2 percentage points from 5.1% in January 2016 to 5.3% in January 2017. The unemployment rate increased due to more people looking for work and compares favorably to Georgia (5.5%) and higher than the US (4.8%). The Atlanta metropolitan statistical area nonfarm job creation totaled 96,800 in the Atlanta-Sandy Springs-Roswell metropolitan statistical area over the past year. Office using jobs (information, professional and business services and financial activities) added 35,100 jobs during the past year. 

The Atlanta office market recorded a negative 182,009 square feet (sf) of overall absorption during 1Q 2017. Direct absorption totaled negative 13,178 sf. Absorption during the first quarter was off to a slow start for 2017. Major occupancies by State Farm, Anthem, Regus, Kore Telematics and Rock 10 were not able to overcome vacancies by Coca Cola, State Farm sublease and several small to mid-sized companies. Absorption is expected to increase during the rest of 2017. Global Payments, State Street Corp., Racetrack, Anthem, and Equifax are all expected to occupy more than 50,000 sf during 2017. As the Class A vacancy rate continues to drop, demand for space in Class B buildings is expected to increase. Currently, only ten existing Class A buildings can accommodate a user larger than 100,000 sf. Demand for space is expected to continue as corporations continue to find Atlanta a good match for their Southeast destination.

Due to an ongoing increase in demand for space, the total vacancy rate has dropped from 17.2% in 1Q 2016 to 17.1% at the close of first quarter 2017. Direct vacancy rates dropped 0.3 percentage points from 16.5% to 16.2% during the same time period. 

Weighted average rent growth continued to improve during 1Q 2017 especially in Class A properties in Buckhead, Midtown and Central Perimeter. Weighted average asking rents in all classes rose 5.0% recording $23.38 per square foot (psf) at the close of 1Q 2017 compared to 1Q 2016. Class A weighted average rents rose 6.2% year-over-year, recording $26.20 psf at the close of 1Q 2017. Class B rents rose 1.8% year-over-year, recording $20.33 psf at the close of 1Q 2017. We expect rents to continue increasing during 2017 with higher escalations in Class A buildings in submarkets with low vacancy and construction activity. Class B weighted average rents are expected to follow suit as options in Class A buildings drop.

- Steve Harriss, Atlanta's Director of Analytics