Atlanta’s office market ends challenging year on the upswing.
- Absorption was positive for a second consecutive quarter, showing continued signs of recovery for Atlanta office.
- The year’s overall occupancy loss in conjunction with elevated space deliveries have led to a decade-high vacancy rate.
- Though rising 3% year-over-year, quarterly rental rate increases are beginning to slow.
- Occupancy gains of the last two quarters show promise for positive activity continuing in 2022; however, some headwinds still remain.
Atlanta office market overview
The final quarter of the year showed continued progress for the Atlanta’s office market as just under 500,000 square feet of space was absorbed. This marks the second consecutive quarter with more space occupied than vacated and helps fill some of the void created in the first half of the year. Nevertheless, the occupancy losses of Q1 & Q2, combined with the highest annual amount of space delivered since 2002 have resulted in the market’s highest office vacancy rate in a decade. Fortunately, leasing activity returned convincingly in the back half of the year, bolstered by back-to-work initiatives, expansions, and large, new-to-market leases.
Atlanta real estate market forecast
While conditions appear to be looking up for the office market, challenges do remain. Heading into 2022, the ongoing pandemic continues to muddle the office scene in terms of confusing tenants on their space needs, and also creating short-term or long-term questions as to the length of their leases. Additionally, soaring construction costs are pushing build-out costs down to tenants as allowances are not covering. Inflation in general is testing the overall economic recovery adding to the uncertainty affecting office decisions. Fortunately for Atlanta, the prospects of new business remain high given the metro’s location in the Sunbelt where many companies are migrating. Examples of these played out during the second half of the year with large leases and expansions by Carvana, Visa, Micron and Cisco transpiring. This activity is anticipated to continue in 2022, providing an optimistic outlook for the metro area’s office fundamentals; however, the pandemic’s ongoing impact will be closely monitored.