Even while there aren’t many options for upscale space, not every business feels the need to play, at least not right away.
According to Avison Young, the number of finalized leases by square footage in Atlanta’s urban submarkets fell by 45% in the second quarter when compared to the same period last year. It indicates that businesses are either taking their time to complete a lease or are prepared to wait patiently for the ideal workspace to become available.
The macroeconomic environment makes it easy to understand why. Given the continued popularity of hybrid work schedules, many businesses are still unsure of how much office space they require. Others find it difficult to predict their future demands due to uncertainties surrounding tariffs and other issues. Increasing building expenses are another factor.
According to Chris Godfrey, principal of Avison Young’s office leasing in Atlanta, businesses have been taking longer to make judgments. I still feel positive about the second half of the year, though, even though the deal flow kind of slowed down in the second quarter. I believe they still need to make a decision.
The second quarter, which spanned April through June, witnessed fluctuations in corporate and consumer confidence due to President Donald Trump’s trade war. The United States has reached framework agreements with dozens of nations, but there are still issues with other nations, including important trading partners like Canada, China, and Mexico.
Even though lease negotiations are still ongoing, Zach Wooten, an office landlord broker for Cushman & Wakefield, said the modifications have left everyone in the dark.
“We haven’t seen any deals just die because of any of that,” he said, referring to changes in economic policy and tariffs. In order to make the best option possible, I believe there are many agreements that are made behind closed doors, merely discreetly and perhaps a bit more systematically, by rehearsing scenarios.
The office market in the area is still difficult, particularly when Class B buildings are taken into account.
Absorption is an industry indicator used by real estate professionals to measure market momentum. That is the amount of net space that is either leased, removed from the market, vacated, or added to the ledger’s available space end during a specific time period. Since 2023, the Atlanta region has experienced negative absorption for almost every quarter, indicating that there was greater net space available.
According to Stern, the data indicates a market that is becoming more divided. Businesses are prepared to overlook a sea of vacant seats that don’t fit their requirements or standards while they compete for the few available seats they desire.
She said, “We’ll see how long it takes for the musical chairs game to end.” I’m not sure whether tenants will agree because their company, employees, brand, and image are all on the line.
