Office leasing activity in Atlanta is continuing to recover nearly five years after the COVID-19 pandemic upended the way companies and employees view the workplace.
Cousins Properties, one of Atlanta’s most prominent office landlords, leased more space to companies in the quarter that ended in September than any other period since 2019. About 80% of this space were from new leases or expansions to companies’ existing offices.
Executives reported the leasing activity during an earnings call Friday. Cousins officials maintained a bullish outlook for the company’s portfolio of high-end, “lifestyle”-driven offices that stretch across the Sunbelt and noted the lack of demand for older commodity properties.
“Broadly speaking, the office market as a whole is going to stabilize. You’re going to see lower-quality properties, candidly, disappear and (be) repurposed, while the highest quality buildings fill back up. And that process is certainly underway today. And that gives us a lot of optimism,” CEO Colin Connolly said during the call.
In Atlanta, Cousins leased 104,000 square feet of space in the third quarter. More than two-thirds of that amount were new leases or expansions.
Cousins’ leasing activity is a small window into the office market at large in metro Atlanta, which is still grappling with high vacancies, move-outs from companies with large office spaces and debt maturity issues. About one-third of all office space in the region is either vacant or otherwise available for lease.
Credit: Credit: Courtesy Cousins Properties
Credit: Credit: Courtesy Cousins Properties
It’s not all doom and gloom, though — companies are still signing leases, office rents aren’t falling and the construction pipeline for new buildings is shrinking, a positive sign in a market with so much available space. More than 2.2 million square feet of office leases were signed in the metro area during this year’s first quarter, the most activity to start a year since 2020 at the start of the COVID-19 outbreak.
Larger leases are starting to return. In the third quarter, seven of the deals signed were 75,000 square feet and greater, the second consecutive quarter this has happened since before the pandemic, according to real estate services firm Jones Lang LaSalle.
Plus, several companies with large Atlanta employee bases, including UPS, Truist and NCR Voyix, announced return-to-office mandates this year requiring workers to clock in five days a week from a physical office.
During the call, Connolly said Cousins’ portfolio was 88.4% occupied, up from 87.6% at the start of the year. He believes it will return to more normalized levels of occupancy, which is “certainly north of 90%,” within the next year or two.
“At Cousins, we’re spending less time talking about return to office and more time about returning to normal. Our customers are back more in force. The leasing demand is running parallel with that,” Connolly said.
Cousins also provided more insight on its recent investment in Midtown’s Proscenium office tower. In August, Cousins closed on a joint-venture acquisition of the building with New York real estate investment firm Town Lane. Cousins has a 20% interest in Proscenium, and is providing property management, leasing and redevelopment services for the partnership.
Cousins is planning significant upgrades to modernize the building at 14th and Peachtree streets, a strategy it has employed at several other buildings in Atlanta, including the nearby Promenade campus. The redevelopment efforts will begin in 2025.
“We built the company to thrive during all economic cycles, and today we are in a highly advantageous position,” Connolly said.
Cousins reported net income of $11.2 million during the third quarter, a 42% decrease from the same quarter in 2023. The company also reported $209.2 million in revenue, up from $198.8 million the same time last year. The company’s stock price remained stable Friday, and is up by 30% year to date.
