Commercial Real Estate News / General CRE / Q3 2022 Office Space Report: Atlanta, GA

Q3 2022 Office Space Report: Atlanta, GA

Published: 01-23-23 Category: General CRE

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Home to several Fortune 500 companies, including Coca-Cola, Home Depot and United Parcel Service (UPS), the city of Atlanta also offers attractive tax incentives to businesses considering a move to Georgia.

These and other factors continue to keep office space in Atlanta in higher demand than many other big cities, with over three million square feet of new office construction underway during Q3 2022.

Atlanta’s unemployment numbers for November 2022 came in at 3%, below the national average of 3.7%. The city is also home to Hartsfield-Jackson Atlanta International Airport, the busiest in the world.

Even with some businesses still allowing staff to work remotely, Atlanta’s office space is still in demand. The city’s vacancy rates have barely changed in the last 12 months, with Q3 2022 ending at 19%, a slight increase from Q2 2022’s office vacancy rates.

General Area Overview & Demographics

Atlanta is the state of Georgia’s capital and its biggest city, with almost 500,000 people living within its city limits and over 6 million people within Atlanta’s metropolitan area.

According to the US Department of Commerce, Atlanta’s economy is the tenth-largest in the United States and the 20th-largest in the world. As of 2021, the city’s gross domestic product (GDP) stood at around $406 billion.

The 2020 Census recorded the median household income for the city at around $66,657.

Although not seeing the same influx of West Coast businesses as Texas, the state of Georgia is within the top five states seeing relocations from states with higher business taxes and costs of living.

Georgia offers its own portfolio of incentives for new businesses. These begin with low business tax rates, plus additional tax credits for job creation and investing in R&D.

Summary of Atlanta Office Space Performance in Q3 2022

Atlanta’s year-to-date (YTD) absorption rate ended at a positive 1.4 thousand square feet (MSF), which was the highest YTD amount absorbed in seven years — since 2015.

Vacancy rates remained virtually unchanged year-over-year and ended Q3 at 19%.

While leasing activities during the quarter weren’t quite as busy as earlier in 2022, the average asking rent price climbed to $30.02 per square foot (PSF).

The Midtown submarket came out on top, with the highest PSF prices, around $41.00 PSF.

Several new Class A buildings opened for business, including the Midtown Union, which was 60% pre-leased at the time of delivery.

Downtown’s new Fourth Ward mixed-use development was already 68% pre-leased when it “went live”.

Buckhead’s One Phipps Plaza, a 13-story building in the heart of the upscale Phipps Plaza, was 35% pre-leased at time of delivery.

What Are Office Space Rents Like in Atlanta?

Q3 2022 Office Space Report: Atlanta, GA

The current average asking rents for office space in Atlanta came in at an average of $30.02 PSF during the third quarter of 2022.

Space in office buildings within two of Atlanta’s most upscale submarkets, Midtown and Buckhead, came in at considerably higher prices.

Midtown Atlanta is known as the “Heart of the Arts,” with a mix of Class A office properties, museums, and art galleries. Midtown office space was offered at an average asking rate of $41.08 PSF.
The affluent Buckhead submarket — home to five-star restaurants and premium boutiques — wasn’t far behind. Buckhead office space was being leased at an average asking rate of $36.05.

Office asking rents within Atlanta’s other eight submarkets vary from over $32.00 to around $20.00 PSF, depending on the building’s class rating (A, B, or C).

Purchase & Leasing Activity

Both sales and leasing were active across Atlanta’s submarkets during Q3 2022, with several office properties going for nine-figure prices. This brought total sales volume for the quarter to over $1.4 billion.

The biggest deal: Midtown’s 1180 Peachtree Street NE, a 41-story, LEED Platinum-certified building. It was purchased by Piedmont Office Realty Trust for $472 million ($683.07 PSF).

Another big buy: The Towers at Wildwood Plaza. The purchase was brokered by The Simpson Organization, with the buyer paying $109.5 million ($142.62 PSF) for the 767,000 SF development.

Telecoms giant AT&T signed the biggest rent contract of the quarter, renewing their office lease at Midtown Center I at 754 Peachtree Street for 259,738 SF (over half of the building’s 529,000 SF).

Notable Office Space Deals in Atlanta in Q3 2022

While most of the top office leases were renewals, one new Midtown deal stands out.

Defense technology specialists Anduril Industries leased more than 180,000 square feet at Allied Studios in Atlanta’s Upper Westside.

Anduril plans to invest $60 million into their new space, creating a manufacturing and research facility and creating at least 180 new jobs.

New Office Development Activity in Atlanta in Q3 2022

Beginning in mid-2023, several major office developments are scheduled to be delivered to Atlanta’s commercial real estate market. They include:

1020 Spring Street, a 36-story, three-tower development. In addition to 700,000 SF of office space, the mixed-use towers will house 350 apartments and a 325-room hotel. Delivery is scheduled for Q3 2025.

Science Square in Downtown, a 365,000 SF development. It is the first to be 100% dedicated to housing biomedical research and technology tenants.

Our Forecast for Atlanta’s Office Space Market in 2023

With over 3.7 million square feet of office space currently under construction, combined with the continued relocation of major businesses, the outlook for investors is definitely positive.

Average rental asking rates have grown annually for almost a decade, with the arrival of the COVID pandemic in 2020 having little effect on prices.

Takeaways for Office Space Investors

With a total of 10 flourishing submarkets, the city of Atlanta offers plenty of options to new investors as well as experienced investors.

Although the city’s cost of living is beginning to edge upward, educated individuals are still headed to Atlanta. The metro population has grown by 400,000 in just seven years.

Investors may want to consider working with a local broker, especially since brokers may have insider knowledge of office space in Atlanta that matches their portfolio requirements.