Contact Us

Atlanta's Office Market Has Peaked

Atlanta's decadelong office market heyday is in the rearview mirror now that economic headwinds have turned against the commercial real estate industry.


Jitters over the fate of the global economy, pressure from rising interest rates and the evolution of hybrid workplace strategies have started to impact corporate leasing activity in Metro Atlanta, with vacancy rising and absorption of office space slowing, according to CBRE third-quarter data provided to business.

Companies leased 1.5M SF of Metro Atlanta offices in the third quarter, a far cry from the 2.6M SF leased in Q2 and the 2.8M SF leased a year ago. The largest new lease signed this past quarter was defense equipment maker Andruil's 180K SF deal at Jamestown's Allied Studios project on the Upper Westside.

“Deal activity has definitely slowed down, and what has really slowed down is new inbound business to Atlanta,” Colliers Senior Vice President and principal Jessica Doyle said. “We were high for a while there with new companies looking to come to Atlanta, but that has slowed down tremendously."

Metro Atlanta has become a destination for major corporations locating new offices in the Southeast. Companies such as BlackRock, Google, Microsoft, Cisco, Visa and Papa John's either opened large new offices or moved headquarters to Atlanta, chasing the talent emerging from the state's institutions, especially Georgia Tech and the Historically Black Colleges and University system in Atlanta. 

But that tide of corporate migration has started to ebb. Office vacancy ticked up to 23.4% in the third quarter, nearly a point higher than last year, while sublease availability hit 5.1M SF, up 250K SF year-over-year. 

That figure doesn't include The Home Depot, which put more than 600K SF of its suburban offices up for sublease this month in the Cumberland/Galleria submarket and in Cobb County, CoStar recently reported.

"The vast majority of our over 500,000 associates work in our stores and distribution centers. At the start of this year, some of our store support center associates began a hybrid model for office work, and as a result, our need for office space has shifted," Home Depot spokesperson Margaret Smith told Bisnow in an email.

Net absorption was still positive in the region at 300K SF, but that marked a sharp deceleration from the previous quarter, when there was 1M SF of absorption. In Q3 2021, companies absorbed more than 1.8M SF of Atlanta office space.

Metro Atlanta landlords also are facing the prospect of more than 10M SF in lease expirations through the end of 2023, according to Avison Young, citing data from CoStar. Those expirations are coming as many tenants, especially Fortune 500 companies, are in the process of downsizing their footprints as remote work and work-from-home policies become cemented, OA Development partner Brian Granath said.

Granath told Bisnow that his firm, which leases and manages 1.2M SF of office throughout the Southeast, is seeing a flurry of activity among tenants seeking less than 10K SF. But that activity will do little to help with the metro area's overall absorption moving forward.

“We seem to be at a point where we're starting to feel the slowdown in the overall economy,” Granath said. “[Smaller tenants] cannot keep up with the larger leases."

The number of layoffs announced in Metro Atlanta this year has already surpassed 2021's total, according to the Georgia Department of Labor. Corporate giants like Amazon, MetaApple and Google, which has a large Atlanta presence, announced plans to freeze new corporate hiring.

“We're at the inflection point. I truly don't know, man,” Greenwood Commercial Real Estate Group principal James Pitts told Bisnow when asked if the market has peaked for this cycle. “We need to kind of wait and see how this plays out. I think people are taking a pause and they're trying to read temperature."

Pitts said the office market is facing “choppy waters” that are largely out of its control, especially from interest rates and simmering geopolitical tensions.

Developers' past optimism is now coming to fruition in the market, with the largest single quarter of deliveries in 21 years, according to CBRE. Developers finished nine buildings totaling 2.1M SF in the third quarter — including Midtown Union, One Phipps Plaza and 14th and Spring — the most since the 2.45M SF unleashed in Q1 2001.

There are still 2.8M SF of offices under construction, according to CBRE, which could drive vacancy even higher.

Granath said he expects Atlanta's office market will slog through corporate real estate contractions for the next 18 to 24 months, especially as companies reckon with their expiring leases as the U.S. economy most likely falls into a recession. But he is optimistic that the slowdown is cyclical, rather than a result of a systemic shift toward less office usage.

“Corporate America will start to bounce back with office use as we come out of the recession in '24,” Granath said.