July 21 2022

Atlanta Office Market Report – Second Quarter 2022


After a slow start to 2022, the Atlanta office market registered its strongest quarterly gains since the pandemic’s onset with almost 1.1 MSF of direct net absorption in Q2, improving the trailing 12-months total to 2.1 MSF of occupancy gains. The strong leasing gains which outpaced supply resulted in the market-wide direct vacancy rate declining by 40 bps to 19.7% in Q2 after hitting its highest level since the late 1980s largely due to an influx of construction deliveries.

The Class A sector rebounded with 817k SF of direct net absorption in Q2 after suffering a temporary retraction early in 2022, bringing the trailing 12-months total up to 1.5 MSF. Class B properties also posted 296k SF of occupancy gains in Q2, pushing the trailing 12 months total up to 560k SF.

Noteworthy move-ins contributing to the absorption gains included Google occupying 397k SF at 1105 WP in Midtown, Emory Healthcare moving into 182k SF within the recently redeveloped Northlake Mall, and Insight Global occupying 84k SF at Twelve24.

Sublease availability jumped by 422k SF to an all-time high of 6.5 MSF in Q2. Suburban submarkets currently account for 69% of the sublease inventory with most of the space located in Central Perimeter, North Fulton, and Northwest Atlanta.

Leasing activity has accelerated to 10.6 MSF over the trailing 12 months, up 45.7% since hitting its pandemic low a year ago. Leasing volume totaled 2.7 MSF in Q2, up 49.2% compared to a year ago, but remains 20.9% below the pre-pandemic quarterly average. Tour activity has picked up as occupiers have regained confidence and are more willing to execute on longer-term leasing decisions previously placed on hold due to the pandemic.

The largest lease transactions inked in Q2 included Truist Financial securing a 250k SF pre-lease commitment at 900 SE Battery Avenue, while Transportation Insight signed a 174k SF deal and Insight Global signed a 134k SF deal at Dunwoody’s new Campus 244 project.

New construction remains robust with 4.8 MSF underway, which is currently 33% pre-leased. Approximately 3.7 MSF of new product is scheduled to deliver by year-end, which is expected to push vacancy levels higher until demand begins to consistently outpace supply in 2023.

Rent growth has significantly slowed since the pandemic emerged two years ago but rental rates have trended upwards by 2.2% year-over-year, due to the influx of high-quality new construction delivering to the market on a speculative basis. Rising construction costs and sustained demand for quality space are expected to push rents even higher in the year ahead.

Even though uncertainty has increased, Atlanta’s office market finds itself in an improved position as many companies are returning to the office and several large upcoming corporate expansions and relocations recently announced should continue to bolster the local economic recovery in the year ahead.

The long-term outlook remains positive as metro Atlanta is expected to outperform and recover faster than other major markets as pent-up activity and inbound corporate relocations should translate to stronger leasing momentum and help generate more occupancy in the year ahead.

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