Negative Absorption Doesn't Dampen Record Atlanta Retail Rents

The Metro Atlanta retail scene became a study of contrasts in 2025.

Retailers gave up more retail space than they occupied in 2025, the first contraction since 2009, according to Partners Real Estate.

But at the same time, landlords brushed off the tenant losses and pushed rents to rebound from a down third quarter to set a new record high in the fourth quarter throughout Metro Atlanta.

The negative net absorption in Atlanta may belie the true health of Atlanta's retail market, Matthews Senior Vice President Kyle Stonis said. Landlords can pick from top retailers to replace departing tenants. This means renters have little leverage to negotiate asking rents, especially if tenants need to ask for improvements.

“In terms of gateway markets like Atlanta, there’s no pushback at all,” Stonis said. “They have no choice. If they want to be in a spot and they want the TI, they’re going to have to pay the rental rate.”

Retail leasing fell in 2025 by more than 14% from the year before to 5.8M SF, with landlords tallying nearly 875K SF of negative net absorption for the year, including a 229K SF contraction in the fourth quarter, according to Partners.

But at the same time, retail landlords pushed average rental rates throughout the metro area to a record-high $19.98 per SF, a figure that represents more than 4% growth from the previous quarter's $19.20.

Rents in affluent areas like North Fulton and East Cobb grew fastest, by 7.5% and 6.8%, respectively. In Buckhead, where the vacancy rate is a scant 3.4%, rents climbed more than 5% to $41.78 per SF, according to Partners. 

A throttled pipeline for new retail development has helped rents climb so high.

“A slowdown in new construction placed upward pressure on rents as elevated construction and financing costs continued to suppress development,” Partners Senior Vice President Alex Kaplan wrote in the quarterly report.

Katz & Associates Senior Vice President Julie Solomon said construction costs are a big culprit in elevating rents. This includes material costs, labor costs and costs associated with design restrictions placed on developers by municipalities, especially in affluent areas.

“In certain markets, the rents are getting unachievable because of the higher costs of goods, labor and construction,” Solomon said. 

Negative net absorption last quarter came largely as a result of big-box retail closures in the area, including Big Lots, Joann, Forever 21 and furniture retailer American Signature, Solomon said.

Last week, Saks Global announced it was closing most of its Saks Off Fifth stores nationwide, including locations in Woodstock and Lawrenceville.

The culling of retail locations is expected to continue this year. U.S. retailers plan to shutter around 7,900 stores this year, compared to 5,500 new openings, CNBC reported, citing Coresight Research. 

But one retailer's pain may be another's gain. Quick-serve restaurants like Chipotle, Shake Shack and Raising Cane’s, as well as grocers and fitness retailers, are staking claim to some of those emptying spaces, Solomon said. 

“While there is a lack of good inventory in core markets like Buckhead and Kennesaw, there are a number of retailers closing up shop, presenting opportunities for expansion,” she said. 

Skyline Seven Real Estate President Ryan Holzer said his firm just listed a former Kohl’s off Venture Drive in Duluth for lease. The firm has already received numerous prospects interested in the 88K SF, including “a very well-known electric-car maker” for a showroom, Holzer said.

Not all retail spaces are leasing so quickly, however. 

KB Yabuku, a vice president with Colliers in Atlanta, found a tenant quickly for 8K SF in Powder Springs late last year, but the spaces he is representing along Auburn Avenue in Downtown Atlanta are struggling to find tenants.

“It’s definitely getting harder to get stuff across the line,” Yabuku said. “Downtown obviously is tough. It’s a tale of many cities, just depending on the submarket.”

Smaller retail space is sitting vacant as rents make it hard for smaller retailers to justify new locations, Alcove Commercial founder Laura King said. 

“I’m sitting on the most second-generation restaurant space than I ever have,” King said. “A plant store can’t pay $50 a square foot. You just can’t sell that many plants.”