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Atlanta Led The Nation In Key Office Metric To End 2022

Despite economic uncertainty fueled by a wave of tech layoffs, questions about hybrid work and aggressive Federal Reserve hikes, Atlanta’s office market ended 2022 on a high note.

Metro Atlanta companies absorbed 485K SF of office space in the fourth quarter, the most of any market in the country, according to Cushman & Wakefield.

Companies absorbed more than 1.1M SF of office space throughout the metro area over the course of the year, up from a total of 126K SF in 2021, according to CBRE.

Class-A rents continued an upward trajectory, rising more than 4% to a new high of $34.21 per SF, with some trophy properties commanding more than $51 per SF, according to Cushman & Wakefield. Tenants like Truist Bank, Insight Global and MARTA inked office leases exceeding 150K SF each. 


But even amid the bright spots, office vacancy and sublease availability are still at or near all-time highs. The pool of tenants in the market has dwindled as well, but some brokers say optimism for the market is greater this year than it was a few months ago.

“I was a little bit more concerned about 2023 in August, but our pipeline right now is pretty robust,” Colliers Senior Vice President Jessica Doyle said. “There’s always concern when there are softening market conditions. But it’s not doom-and-gloom that the market is going to end.”

Tenants totaled 1M SF of leasing activity in the fourth quarter, driven by small and midsized tenants, bringing the annual leasing total to 7.5M SF, Cushman & Wakefield reported. Developers delivered nearly 2.5M SF of office space, 45% of which was pre-leased. 

Atlanta’s vacancy rate remained unchanged at year-end at 22.4%, hovering close to all-time high numbers during a period when most economists expect the U.S. to fall into a recession.

Atlanta’s vacancy rate hit 25% in 2004, according to Cushman & Wakefield, but its head of local research doesn't expect this cycle to set a new all-time record.

“No one’s crystal ball is working really well right now, but if we have not peaked on vacancy, we’re very, very close,” Cushman & Wakefield Research Director Christa DiLalo said. 

After a year in which tenants leased 1M SF more than they vacated, 2023 absorption will likely be weaker, possibly flat by year's end, DiLalo said. 

Truist signed the largest deal of the year, a 250K SF build-to-suit office lease in April at The Battery at Truist Park, with plans to move from Atlanta Financial Center in Buckhead in early 2025.

That deal was followed by Transportation Insight’s 174K SF lease and Insight Global’s 134K SF deal, both at Campus 244 (formerly called Twelve24) in Central Perimeter, and MARTA’s expansion last month into a former AT&T facility in Lindbergh.

Kirk Rich of Avison Young

But there are signs that 2023 might see a significant step back.

Brokers acknowledged activity has slowed, especially among companies searching for big leases, but tenants are finally willing to make longer-term decisions as they reach clarity with a hybrid work model, Avison Young principal Kirk Rich said. That is a big change from the attitude tenants had last year when few would commit to space decisions — although the long-term moves have by and large led to a contraction in the amount of space tenants have needed, Rich said.

“We’re getting into a new normal for what corporations really need,” he said. "I think the back half of last year and getting into this year is really going to settle that question."

There are fewer tenants in the market, down from 326 in December 2021 to 254 prospects at the end of 2022, according to Cushman & Wakefield. That pool is made up increasingly of smaller requirements: Tenants seeking between 10K and 20K SF have grown from 75 in December 2021 to 92 last month.

There are fewer tenants for landlords to pick from to fill bigger vacancies. There were 81 companies scouting for 20K to 49,999 SF in December, down from 121 the previous year; 22 companies seeking 50K to 99,999 SF, down from 51; and 18 companies in the market for 100K to 249,999 SF, a drop from 26 a year earlier, according to Cushman & Wakefield. The firm is tracking six companies in need of 250K SF or more as of December, one less than the same time in 2021.

Rich, who said he is representing an unnamed insurance company close to a deal for 50K SF in Metro Atlanta, said the deal exemplifies what many of those in the market is like today. The firm is shrinking from 70K SF, but part of the deal would allow the company to expand its footprint to 60K SF in the near future.

“It’s actually one of those deals that got held. Now they got the confidence that they’ll need [the space],” he said. “I think it’s a great analogy of what everybody is doing.”