Jun 12, 2023
How will Atlanta’s office market fare amid shifting market conditions? We asked JLL Managing Director and Agency Leasing Broker Jeff Taylor for his insights on the trends impacting the metro area’s office market right now, and what’s to come for the rest of 2023.
How would you characterize Atlanta’s office market these days?
Jeff Taylor: What we’re seeing right now is the gap between the “haves” and the “have-nots” continues to widen. Owners who have taken the initiative to reposition and renovate their buildings, added more amenities and activated their properties are the ones securing not only new leases but also renewals.
Atlanta has been fortunate in recent years, both with residential growth and with companies relocating their headquarters here. We’ve also seen a trend toward a hub-and-spoke model, in which companies continue to have their corporate headquarters in a city like Los Angeles or Chicago, but see all the advantages Atlanta offers from a talent, diversity and cost of living perspective, and identified Atlanta as an ideal regional office to continue accelerating their growth locally.
Are there any particularly interesting projects you’re working on?
Taylor: The Ardent Cos. unveiled their master plan for the redevelopment of Piedmont Center in Buckhead earlier this year, and I’m excited about the future of that project. It’s going to have all the components that other popular mixed-use destinations like Avalon and Colony Square have: hospitality, multifamily and a lot of retail offerings.
At the heart of that project is Oxton, a food-and-beverage hub that will take up 35,000 square feet on the ground level of Buildings 1-4. Scofflaw Brewing Co. recently signed on to open a 5,500-square-foot brewery space that should open next year, and will be a huge draw for people who work and live in the area.
In addition to the new brewery, Ardent plans to fill the space with other local and regional food and beverage tenants, along with retail, fitness and wellness. Piedmont Center is shaping up to be the cool mixed-use destination that Buckhead has been missing.
What other trends are you seeing in the space right now?
Taylor: Across the metro area, we’re seeing that landlords who take an “if you build it, they will come” approach and launch spec suites in their buildings are winning the leasing battle.
So many tenants have held off on making decisions because they’re unsure how they might use their office space in this new world of working. It’s valuable for a person to be able to walk into the space and visualize how the space will work for their company. A lot of landlords have even begun furnishing their spec suites to truly compete with the sublease space on the market.
Another trend we’re seeing is that landlords recognize an increased need for dedicated collaborative space. While we are seeing many Fortune 1000 companies reduce their office footprint, they’re also looking for spaces that encourage employees to come back to the office. That includes buildings with collaboration spaces, as well as amenities that get people excited about coming into work.
Speaking of amenities: in the last five years, we’ve seen an increased trend toward a 24/7 environment. The 8-5 workday is no more, and employees are looking for spaces that they can use in the morning, at lunch, for after-work happy hours, for dinner and more. We’re seeing a lot more rooftop amenities in the newer buildings, as well as entire floors dedicated to tenant amenities, which you never used to see.
What office submarkets are seeing the most activity these days?
Taylor: The two seeing the most activity are Midtown — which has been a common theme over the last several years — and the Northwest, where we’ve seen tremendous leasing velocity and activity recently.
It all comes back to the trends I mentioned. Dynamic mixed-use developments with lots of desirable amenities like Ponce City Market, The Battery and Avalon are doing well, and office buildings in close enough proximity for employees to leverage those amenities reap the benefits.
How are landlords adapting to shifting market conditions?
Taylor: Spec suites, as I mentioned, take a lot of the decision-making out of the process, and more landlords are looking to provide plug-and-play opportunities for tenants for that reason.
Due to increased costs of construction, landlords have also had to increase their budget and tenant improvement (TI) packages. With that, they’ve been able to hold rental rates or even increase rates to accommodate necessary TI packages on longer-term leases.
What are you expecting to see happen in the market this year?
Taylor: You’re going to continue to see conversions of office buildings to alternative uses, whether that’s medical, industrial, multifamily or something else entirely. I would estimate 20% of the existing office product in Atlanta is no longer relevant due to age or lack of amenities, and those landlords will have to pivot to an alternate use to avoid financial headwinds.
On a positive note, I also think Atlanta will continue to be on every company’s radar, thanks to all our city has to offer: a wealth of colleges and universities, high level of diversity, low cost of living, you name it. The city has a lot of momentum right now, and every submarket seems to be focused on doing something cool and dynamic. Whether it’s Centennial Yards in Downtown, Piedmont Center in Buckhead, the continued acceleration of the Battery in the Northwest or High Street in Central Perimeter, every submarket seems to have an exciting new development that’s set to come online in 2023. Atlanta’s future is still bright.