Space Atlanta

Te n a n t ’ s Guide North American Markets Second Quarter 2009 Atlanta, Georgia Overview Atlanta's class A office vacancy rate of 17% continues to exceed the national average of 16%, resulting in part from Georgia's climbing unemployment rate of 9.7%. Given that the national office vacancy rate did not exceed 13% over the past 14 years, the current rate is exceptionally high and is forecasted to continue to rise over the remainder of 2009. Negative net absorption in the 2nd quarter for the overall Atlanta office market is estimated at over 1.1 million sf, with sublease office space rising to 3.7 million sf. The average quoted rental rate for all office classes is $19.56 per sf, representing a 2.4% decline from the end of the 1st quarter. Georgia is one of the nation's worst for bank failures with 14 since August 2008. Non-performing residential loans were a major contributor, but the rise in commercial loan delinquencies is expected to have a significant impact, causing additional Georgia bank closures in the near future. An illiquid credit market, combined with declining property values, will result in financial distress for building owners with maturing debt that cannot be refinanced. Major Transactions Tenant/Buyer SunTrust Bank AECOM Firethorn Financial Freedom McAfee, Inc. Smartsoft International Parsons Group Sunshine Mortgage Corp. MasTech NSoro Size 254,619 52,521 49,879 37,762 31,841 26,753 26,496 26,346 24,728 Type Office Office Office Office Office Office Office Office Office Office Lease/Sale Lease Lease Lease Lease Lease Lease Lease Lease Lease Lease Parker,Hudson,Rainer&Dobbs 44,396 Vacancy Rate Q4 2008 25% 20% 15% Q1 2009 Q2 2009 Market Trends Ÿ 3.2 million sf of new office space is under construction in Atlanta, with over 1.8 million sf scheduled for completion by year-end. Ÿ The Downtown Atlanta submarket has the highest reported class A vacancy rate at 20.5%. Ÿ The Buckhead submarket has the highest quoted class A rental rates at $26.68 per sf. Ÿ While both the Central Business District and the Suburban submarkets experienced negative absorption in the 2nd quarter, Central Perimeter was the hardest hit with more than 400,000 sf of negative absorption. 10% 5% 0% Class A CBD Class B CBD Class A Suburban Class B Suburban Average Rental Rates CBD Class A Office Class B Office Q4 2008 $20.79 $18.26 Q1 2009 $20.85 $18.59 Q2 2009 $20.77 $18.78 Tenant's Perspective At the beginning of 2009, landlords assumed that they could weather the downturn by granting higher tenant improvement allowances and free rent, rather than lowering rents. However, with rising vacancy rates, rents are starting to decline, with some experts predicting that rates will shrink by 8% or more by year-end. Office space users should consult with a CresaPartners Advisor to develop a strategic plan to minimize occupancy costs over the long term. Careful analysis of competitive alternatives is recommended, along with a watchful eye on the financial health of the building owners. Suburban Class A Office Class B Office Q4 2008 $23.62 $17.90 Q1 2009 $23.25 $17.39 Q2 2009 $22.71 $17.20 Prepared By CresaPartners 5607 Glenridge Drive, Suite 400 Atlanta, Georgia 30342 404.257.8866 www.cresapartners.com