Atlanta Office Rents Are Weathering the Pandemic Well — So Far
The COVID-19 crisis has failed to deter continued growth in Atlanta’s office rents. The average asking rate at midyear was $29.29 per square foot, up 6.4 percent from the same point the previous year. Moreover, the total average rent for offices in Atlanta’s central business district in the third quarter was $32.98, up 2.2 percent from the same time last year, according to Cushman & Wakefield.
“While a slightly slower pace than previous quarters,” brokerage Avison Young said in a second-quarter report, “it is still strong growth given the current economic conditions due to COVID-19. Average Class A rates rose at a pace of 3.7 percent to a record high $32.28 per square foot. Class B average rates increased 5.8 percent to finish the quarter at $21.23 per square foot.”
Colliers International’s Scott Amoson attributes this to the city’s well-balanced development pipeline.
“We haven’t been oversupplied with new product coming online,” Amoson said. “When tenants move out, it’s pretty quick for the landlord to fill the space, and I think a lot of that has to do with supply-and-demand principles. We haven’t been overleveraged in new supply coming online as we have in the past, when we’ve dumped a lot of new product on the market within a couple of years. That held our rent down.”
The current trend of a more balanced supply pipeline also means that Atlanta office rents are better-positioned to absorb a COVID-19-related rise in sublease space. Like in other major metros, work-from-home has become the new normal for many office users, opening up more space.
“Over the recent cycle, because of how much success we’ve seen in bringing companies into the Metro Atlanta market, we’ve seen probably the largest rental rate increase over a decade in this market,” Amoson said. “Now that availability is starting to increase on the sublease side, I think we’ll see maybe a slight dip in asking rent. But, this will be temporary. Maybe by this time next year, we’ll start to see rental rates increase again, as they had over the last business cycle.”