Tariffs, Federal Cuts Freeze Atlanta's Office Market

Office landlords and brokers in Atlanta are feeling the effects of economic and political uncertainty more acutely than just about any other major market in the country.

Leasing activity fell by 45% during the second quarter, according to Avison Young, a period that kicked off with President Donald Trump's April 2 “Liberation Day” tariff announcement that sent markets crashing. But while the S&P 500 has rebounded and then some, Atlanta's office market hasn't recovered.

“I had some deals slow down because of the tariffs,” T. Dallas Smith & Co. principal Cedric Matheny said. 

Over the past year, office leasing in Metro Atlanta was 34% below its average annual pace between 2015 and 2019, according to Avison Young data shared with Bisnow. That is tied with Washington, D.C. for the biggest gulf of any major market. Overall leasing activity in the U.S. was down 23%.

The Trump administration's spending cuts have injected uncertainty into the market. Georgia had more federal office leases canceled than all but four states and D.C., according to Avison Young. The Centers for Disease Control and Prevention, a major economic driver, is at risk of losing more than half of its funding.

“Some deals were put on hold to see how the government stuff kind of shakes out,” Matheny said. “If you’re in that industry where the federal government really affects your business, that can slow down leasing activity.”

Through 2025, more than 510K SF of office space in the region has been vacated, although the majority of that negative absorption occurred in the first quarter.

“I think there are lingering effects of Covid, and I think there’s such uncertainty about what’s going to happen since January that people are either staying still or they’re shrinking,” Greenwood Commercial Real Estate Group principal James Pitts said. 

Haley Leek, market intelligence analyst for Avison Young, said the leasing pullback was strongest in Atlanta's core submarkets, especially Buckhead and Downtown. The only lease for more than 50K SF signed in the second quarter in the central business districts was AT&T’s 73K SF renewal at 1277 Lenox Park in Buckhead. 

Pitts said he has also seen an uptick in companies negotiating early lease termination clauses, such as an option out of a lease in seven years on a 10-year deal.

“People want flexibility right now,” he said.

Chris Godfrey, principal with Avison Young in Atlanta, said Central Perimeter has seen a strong uptick in activity. Among the four largest office leases signed in Metro Atlanta in the second quarter, three were in Central Perimeter, including the largest deal: Human resources firm TriNet Group's deal for nearly 150K SF at 211 Perimeter Center Parkway.

“Central Perimeter has certainly been the darling of the year,” Godfrey said. 

One healthy trend in the market is the shrinking of available sublease space, Godfrey said. Sublease availability dropped from 9.2M SF in Q2 2024 to 7.9M SF at the end of June, according to CBRE's preliminary numbers. 

Avison Young backfilled 100K SF in subleases over the past year, Godfrey said. 

While the leasing market stalled out, the sales market has shifted into gear. Sales volume rose nearly 300% from the first quarter and almost 50% year-over-year, according to Avison Young. 

Twenty-two office properties sold in the second quarter for an average of $159 per SF, according to Partners Real Estate. The biggest sale of the quarter was Bawag Group and CP Group's foreclosure auction purchase of Piedmont Center for $200M, followed by Spear Street Capital buying 1100 Peachtree from Manulife for $133.8M and Atlanta Braves Holdings buying 763K SF Pennant Park and Pennant View from Rubenstein Partners for $93M.

Pitts said the recent spate of office buildings trading hands could also help the leasing market. 

“The wrong capital stacks right now, that’s certainly squeezing [office buildings],” he said. “The ones that haven’t got the reset, they’re hurting.”