The office leasing market in Atlanta is facing significant challenges, exacerbated by economic and political uncertainties that have affected activity more than in many other major markets across the country.
According to a report by Avison Young, leasing activity plunged by 45% in the second quarter, coinciding with President Donald Trump’s announcement of increased tariffs on April 2, which negatively impacted market conditions.
Despite the S&P 500 rebounding since then, Atlanta’s office market has struggled to recover.
“I had some deals slow down because of the tariffs,” noted Cedric Matheny, principal at T. Dallas Smith & Co.
For the past year, office leasing has been running 34% below the average annual pace observed between 2015 and 2019 in Metro Atlanta, a downturn that matches Washington, D.C. for the largest drop among major markets.
In contrast, overall leasing activity across the United States fell by 23%.
This decline has been intensified by the Trump administration’s spending cuts, which have injected a sense of unpredictability into the market.
Data from Avison Young shows that Georgia is among the states with the highest number of canceled federal office leases, trailing only four states and D.C.
The funding challenges faced by the Centers for Disease Control and Prevention (CDC), a critical economic driver in the region, could lead to loss of over half its funding, further contributing to the uncertainty.
Matheny commented, “Some deals were put on hold to see how the government stuff kind of shakes out. If you’re in that industry where the federal government really affects your business, that can slow down leasing activity.”
Vacancies have surged in the region, with more than 510,000 square feet of office space vacated through 2025.
Most of this negative absorption occurred in the first quarter of the year, underscoring the ongoing impacts of the pandemic and recent political developments.
Greenwood Commercial Real Estate Group’s principal, James Pitts, remarked on the stagnation many companies are experiencing.
He stated, “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.”
Haley Leek, a market intelligence analyst for Avison Young, mentioned that the most pronounced drop in leasing activity occurred in Atlanta’s core submarkets, particularly in Buckhead and Downtown.
In fact, the only significant lease executed in the central business districts during the second quarter was AT&T’s 73,000 square foot renewal at 1277 Lenox Park in Buckhead.
Pitts noted a trend of companies negotiating flexible lease terms to adapt to the shifting market, including early termination clauses for long-term agreements.
“People want flexibility right now,” he explained.
On a more positive note, Chris Godfrey, principal at Avison Young in Atlanta, highlighted that Central Perimeter is witnessing a resurgence in leasing activity.
Among the four largest office leases signed in Metro Atlanta in the second quarter, three were located in Central Perimeter, including a significant deal by TriNet Group for nearly 150,000 square feet at 211 Perimeter Center Parkway.
“Central Perimeter has certainly been the darling of the year,” Godfrey concluded.
Additionally, Godfrey indicated a healthier trend in the market with the reduction of available sublease space, which fell from 9.2 million square feet in Q2 2024 to 7.9 million square feet by the end of June, according to preliminary figures from CBRE.
Avison Young successfully backfilled 100,000 square feet in subleases over the past year.
While the leasing market has encountered considerable slowdowns, the sales market has demonstrated resilience.
Sales volume surged nearly 300% from the first quarter and rose almost 50% year-over-year, according to Avison Young.
In total, 22 office properties were sold in the second quarter, with an average selling price of $159 per square foot, as per Partners Real Estate.
Among the largest transactions, Bawag Group and CP Group purchased Piedmont Center for $200 million, followed by Spear Street Capital’s acquisition of 1100 Peachtree for $133.8 million and Atlanta Braves Holdings’ purchase of the 763,000 square feet in Pennant Park and Pennant View for $93 million.
Pitts added that the recent trend of office buildings changing hands could potentially revitalize the leasing market.
He emphasized, “The wrong capital stacks right now, that’s certainly squeezing office buildings. The ones that haven’t got the reset, they’re hurting.”
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