The Atlanta area continues to have a glut of unused office space, but the companies looking for the cream of the workspace crop are increasingly finding limited choices.
It’s turned high-end office districts like Midtown or along the Beltline into a fast-paced game of musical chairs where companies are vying for a select handful of open spaces.
“There’s only so many blocks, and there’s more users than blocks of space,” said Ellen Stern, an Atlanta-based senior vice president with real estate service firm CBRE.
Nearly a third of all office square footage remained available to rent at the end of June, according to CBRE. The overall pace of leasing has also slowed. But there’s a wide gap between luxury office properties, often called class A or trophy, and aging and less-opulent buildings called class B.
For the Class A variety, only 20% of space was available to rent at the end of June.
Average monthly rents for Midtown office space increased to $44.70 per square foot by the end of June, an 11% increase from the same time a year ago, according to CBRE data. Asking rents across the entire metro increased only 4% during that span, indicating prospective tenants are willing to pay more for the buildings they want in the neighborhoods they desire.
Compounding the competition is the lack of new office space being built. No new office buildings have finished construction in metro Atlanta so far this year, and about 474,000 square feet is currently being developed, a more-than-decade-long low, according to CBRE.
Meanwhile, underperforming office properties are being torn down or converted into other uses. Colin Connolly, CEO of Atlanta’s largest office landlord Cousins Properties, said Friday in a quarterly earnings call that there “is a declining supply of office at the exact same time demand is growing.”
“The market is resetting, and tightening is underway,” he said, highlighting how his company’s portfolio is nearly 92% leased.
Options for high-end space may be limited, but that doesn’t mean every company feels the need to play — at least not urgently.
The number of finalized leases by square footage declined 45% during the second quarter in Atlanta’s urban submarkets compared to a year prior, according to Avison Young. It’s a sign that companies are taking their time before finalizing a lease or are willing to be patient to wait for their desired workspace to hit the market.
Given the macroeconomic climate, it’s not hard to see why. Many companies are still unsure of how much office space they need given the lingering popularity of hybrid work schedules. Others are struggling with forecasting future needs because of uncertainty related to tariffs and other factors. Rising construction costs are also a consideration.
“Companies have been slower to make decisions,” said Chris Godfrey, principal of office leasing in Atlanta for Avison Young. “But I think they still need to make a decision … so even if the second quarter deal flow kind of slowed, I do feel good about the second half of the year.”
Spanning from April through June, the second quarter saw undulations in consumer and business confidence from President Donald Trump’s trade war. Though the U.S. has struck framework deals with dozens of countries, others, including with top U.S. trade partners such as Canada, China and Mexico remain unsettled.
Zach Wooten, an office landlord broker for Cushman & Wakefield, said those changes have left everyone in the lurch, even as lease negotiations persist.
“We certainly have not seen deals just completely die due to any of that,” he said of tariffs and economic policy changes. “I think there’s plenty of deals that are behind closed doors, just quietly and maybe a little more methodically, playing through scenarios so they can make the most informed decision possible.”
The region’s office market remains challenged, especially when factoring in Class B buildings.
Real estate pros gauge market momentum by an industry metric called absorption. That’s how much net space is either leased or otherwise taken off the market or is vacated or otherwise added to the available space end of the ledger in a given period. For nearly every quarter since 2023, the Atlanta area has seen negative absorption, meaning more net space was available.
Stern said the data shows an increasingly bifurcated market. As companies fight for the handful of open seats they want, they’re willing to overlook a sea of empty chairs that don’t meet their needs or standards.
“We’ll see how long it takes for the game of musical chairs to be over,” she said. “ … I don’t know that tenants are going to settle, because this is their brand, their image, their company and their employees at stake.”
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