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Federal Office Closure Could Harm Atlanta Real Estate

A report published by turnaround management firm ""Anderson Bauman Tourtellot Vos"":http://www.abtv.com/index.html found that a recent move by the Obama administration to clear office space in Atlanta could strangle the city's still-recovering commercial real estate (CRE) sector, potentially throwing back markets in a state with the fifth-largest amount of government real estate outside of Washington, D.C.

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The report, ""Cloud on the Horizon: Government Debt Reduction and the Atlanta Commercial Real Estate Market,"" came on the heels of a May decision by the White House to slash the amount of commercial property owned or leased by the U.S. government. The cuts will dent a market with 8 million square feet by about 2.2 million square feet between now and 2015, according to the firm.

""The government cannot continue to do business as usual and will be forced to take substantial measures to reduce debt, increase revenue and cut costs,"" ""MortgageOrb.com"":http://www.mortgageorb.com/e107_plugins/content/content.php?content.9166 reports John Connor, principal of ""Anderson Bauman Tourtellot Vos"":http://www.abtv.com/index.html, as saying.

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""If the government reduces its footprint in metro Atlanta by 25 percent over the next three years, it will take 1.2 million square feet of occupied space from the market. Any way you spin it, this will exert downward pressure on lease rates and further depress sale prices, likely pushing back recovery for up to five more years.""

According to the report, a freefall in sales for the Atlanta commercial office market slowed to a leisurely pace, with metropolitan vacancy rates coming to 20.28 percent, reflecting a 20-year record, ""MortgageOrb.com"":http://www.mortgageorb.com/e107_plugins/content/content.php?content.9166 reports Richard Bowers & Co. as saying. The glacial pace represents a modest recovery effort for the Atlanta office region, which saw a considerable increase in total office space, going from approximately 127 million square feet in 2004 to some 135 million square feet last year, according to ""Anderson Bauman Tourtellot Vos"":http://www.abtv.com/index.html.

The report calls the effect of government real estate loss a force-multiplier, which it says would fall back on commercial real estate sales, labor employment, and the market in general. It recommends negotiating for new office space set to expire over the next few years and consolidating space inside fewer buildings.

""If the Government is truly serious about reducing costs related to real estate, it should sell a significant portion, if not all, of the owned portfolio,"" the report says. ""This would generate revenues to the Government coffers├â┬ó├óÔÇÜ┬¼├é┬ª. [and] [w]ith a weak lease market, this is an opportune time to strongly negotiate for office space.""

According to its Web site, ""Anderson Bauman Tourtellot Vos"":http://www.abtv.com/index.html is a consulting firm that specializes in corporate renewal strategies.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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