Microsoft Highlighted Rough 2020 For Atlanta Offices, But Experts Foresee Quick Bounceback
One of the largest tech companies in the world also produced the largest office lease in Atlanta last year.
Microsoft's 523,500 SF deal to occupy the entirety of Hines' Atlantic Yards in Midtown topped the list of office activity in Metro Atlanta, with the top 10 deals swallowing more than 1.7M SF in 2020, according to data compiled by CBRE.
But that was a silver lining in a year that otherwise had little good news for office real estate, especially as the coronavirus pandemic froze leasing activity and two major office tenants consolidated their footprints, pushing overall office vacancy rates in Metro Atlanta to nearly 20%.
The remaining top 10 office deals in 2020, according to CBRE, were:
- MailChimp's 300K SF lease at Fourth Ward, New City's latest mixed-use office-centric development in the Old Fourth Ward, and across the street from Ponce City Market, where the email marketing firm outgrew its existing headquarters.
- Deluxe Corp.'s 172K SF lease at Glenridge Highlands Two in Central Perimeter, opening a $12M financial technology innovation and customer service center.
- Bank of America's 155,500 SF renewal at its namesake Downtown Atlanta tower, Bank of America Plaza.
- LeasePlan USA's 107,700 SF renewal and expansion at Oak View I in North Fulton County.
- Macy's 107,700 SF lease at Hines' T3 at West Midtown project, which the company promptly listed on the sublease market after the embattled retailer canceled its plans to consolidate its tech operations out of Johns Creek.
- Preferred Apartment Communities' 94K SF renewal at The Medici on the outskirts of the Cumberland/Galleria submarket.
- Insight Global's 91,600 SF lease at Trammell Crow's Twelve24 office project in Central Perimeter.
- Law firm Seyfarth Shaw's 84K SF renewal at 1075 Peachtree in Midtown.
- ADP's 73K SF renewal at Lakeview 400 in North Fulton.
For the year, landlords tallied a negative net absorption rate of 104K SF, driven by 1.5M SF of negative net absorption in the fourth quarter, according to Newmark.
While rents for Atlanta's top-tier office buildings remained steady at an average of $31.64/SF, that number fails to show the increase in concessions and other incentive packages landlords are tossing at prospects. Sublease space availability increased to the highest level in more than a decade.
“Still reeling from the impacts of the pandemic, planned corporate consolidations led to a glut of space returned to the market,” Newmark officials stated in a recent report, citing AT&T and Synchrony Financial as adding nearly 1M SF back to the market. The American Cancer Society also downsized its footprint in Downtown Atlanta by 200K SF during the pandemic, Newmark reported, after laying off 1,000 employees.
Despite how the pandemic upended Atlanta's office market in 2020, activity in the coming months could be a reversal of fortune for office landlords, especially with the potential of more companies moving offices out of high-cost regions in the U.S. and into the Sun Belt.
“Atlanta's identity as an emerging tech hub with a business-friendly environment will further encourage companies to ramp up their presence here," Transwestern East Region President Bruce Ford wrote in an email.