Atlanta’s Office Pipeline Dwindles, Sales Hold Steady

Atlanta’s office sector is showing steady fundamentals, despite a shrinking development pipeline, a dynamic consistent with broader office real estate trends across U.S. secondary markets. As of November, the metro had one of the smallest under-construction footprints among peer markets.

However, the 16-acre, 1 million-square-foot South Downtown Atlanta project will put the area back into the spotlight. The mixed-use development will transform 57 historic buildings into a vibrant hub of creative office environments, communities and restaurants.

In terms of office sales, Atlanta ranked eighth nationally. The metro registered $1.3 billion in investment volume, with assets changing hands for $131 per square foot.

Atlanta’s office pipeline drops

Atlanta’s office development pipeline comprised only 879,600 square feet of underway space, according to Yardi Matrix data. This accounted for 0.4 percent of the metro’s total inventory, 10 basis points below the national figure.

The market was below most of its peers, including New Jersey (1.1 million square feet) and Houston (1 million square feet). Phoenix (787,148 square feet) and Denver (604,628 square feet) had less space under construction.

Including projects across all planning stages, the metro’s share climbed to 2.3 percent, exceeding the 1.7 percent national average. Boston led the country with 6.1 percent, followed by Austin, Texas (4.7 percent).

Earlier this year, Northside Hospital broke ground on the second medical office building within Northside Hospital Cherokee in Canton, Ga. The six-story, 150,000-square-foot facility is set to come online in 2027 and is already fully preleased.

In terms of office completions, four properties totaling 446,196 square feet came online this year. These projects accounted for 0.2 percent of the metro’s total inventory, marking a 72 percent year-over-year decline.

Sales remain steady, prices below U.S. index

Atlanta office space sales totaled more than $1.3 billion in the first 11 months of the year. Assets in the metro traded for $131 per square foot on average, well below the $190 per-square-foot national threshold.

The market ranked eighth nationally, being surpassed only by gateway metros. New Jersey ($1.2 billion) and Phoenix ($1.1 billion) were close behind.

In May, Spear Street Capital acquired Eleven Hundred Peachtree, a 587,079-square-foot office building, for $133.8 million. The 1990-completed asset traded at a discounted price compared to the $153.9 million it changed hands for back in 2007, Yardi Matrix data shows. Manulife Investment Management sold the asset for $227.8 per square foot.

Another notable deal in the market includes UPS’ sale of a 310,135-square-foot office building in Alpharetta, Ga. Fortress Investment Group acquired the LEED Platinum-certified low-rise for $93.6 million, almost $302 per square foot.

Atlanta’s office vacancy on the rise

Atlanta’s office vacancy rate as of November clocked in at 19.9 percent, marking a 1.9 percent increase year-over-year. This marked one of the largest year-over-year increases nationally.

Peer metros such as Austin (26.8 percent), Denver (23.5 percent) and Houston (20.2 percent) had more available space. However, the market fared worse than New Jersey (19 percent) and Phoenix (17.8 percent) and was above the 18.5 percent national average.

Atlanta’s average listing rates during the same month reached $36.50, representing a 10 percent year-over-year increase. Only gateway markets surpassed the metro, with Manhattan ($68.36) continuing to lead the U.S.

Coworking sector above peer metros

As of November, Atlanta had more than 5.4 million square feet of shared space available across 280 locations. This accounted for 2.6 percent of its total office inventory, above the 2.2 percent national figure.

Among peer metros, Atlanta had the largest share of coworking space. Denver (2.4 percent) and Phoenix (2.2 percent) were close behind. Nationally, Miami (4.4 percent) ranked first.

Regus (625,751 square feet) remained the coworking provider with the largest share in the metro, owning 29 locations. The firm was followed by Industrious (327,033 square feet) and Roam (316,800 square feet).