Pandemic's toll yet to take hold on Atlanta's office real estate market.
- Despite COVID-19's impact on normal business activity, Atlanta's office market has yet to fully experience the negative effects from the pandemic as it absorbed 100,000 square feet of space in Q2.
- The Class A market was where the positive activity of the quarter occurred. Central Perimeter led the market and saw the highest amount of office space absorbed for a second straight period.
- Overall vacancy levels where somewhat steady, only increasing by 10 basis points (0.10%) in Q2.
- Atlanta's overall average rental rate was up yet again this quarter increasing by almost 2%. Despite this, the core submarkets of Central Perimeter and Cumberland/Galleria experienced declines in Class A average rents.
- Atlanta cap rates decreased in the second quarter of 2020.
- So far so good for the Atlanta office market in terms of weathering the store that is COVID-19. Leasing activity is substantially off from this time last year; however, key transactions are still being completed. Projected absorption levels in Q3 look promising, though a large uptick in subleases could affect overall occupancy levels through the end of the year.
Atlanta Office Market
Occupancy gains continued into the second quarter as Atlanta's office market absorbed just over 100,000 square feet of space during the period. This brings the year-to-date total to just over 2 million square feet following the strong activity in the first quarter. Q2's positive absorption came wholly in Class A office buildings.
Move-in activity was the result of new office locations to the city, and also expansions within the market. The largest occupancy this quarter was Siemens relocating to 75,457 square feet at the Catalyst at Peachtree Corners.
More meaningful to Atlanta were the opening of Acoustic's new office here, and also numerous expansions in the market by companies including LGE Community Credit Union, Medciphers, Square, Stibo Systems and Merchant e-Solutions.
Overall, a solid quarter of occupancies despite shelter-in-place orders in April. There were some vacancies to note within the quarter as well. These move-outs dampened the overall positive activity, though most of these were already in the works and not a result of the pandemic.
Atlanta Real Estate Market Forecast
For the most part, the pandemic's affect on Atlanta's office market has yet to drastically impact Atlanta real estate trends. Rents are up, vacancy is level, construction activity is healthy and absorption is positive. That is not to say the Atlanta real estate market forecast has not been affected.
Similar to the record job losses the nation experienced in April, Atlanta's job market also suffered, recording its highest ever monthly loss totaling -293,800 jobs in the same month. The reopening of the local economy has helped reverse this; however, many offices remain empty as the ability to work from home becomes mainstream. This has created much buzz in the commercial real estate industry given its direct impact to office buildings across the nation.
The decline in leasing activity and increase in sublease availabilities is sure to influence absorption activity in the next few quarters. Presently, however, Atlanta's office market is projected to see solid occupancy gains in Q3. The current situation surrounding COVID-19 remains fluid. One aspect of the pandemic which is sure to benefit Atlanta going forward is the metro area's ability to attract companies from outside of the market.