Even with the pandemic still raging, a growing number of metro Atlanta employers have placed bets that office buildings will once again be busy with workers.
The omicron variant is slowing some executives’ plans to get staff back to their cubicles. UPS and other metro area companies have delayed return-to-office plans or discouraged staff from coming in. And there’s still less office space being rented than before COVID-19 arrived.
But companies signed new leases for a total of 2.5 million square feet in the final three months of 2021, according to brokerage Cushman & Wakefield. That’s the highest quarterly total for metro Atlanta since 2.8 million square feet of new leases in the third quarter of 2019. It’s also up sharply from 1 million square feet in the fourth quarter of 2020.
The number of tenants choosing to sign leases also grew in the metro area, although not by leaps and bounds. Total office leases in the fourth quarter rose 2% to 416, compared to a year earlier, according to brokerage Lincoln Property. That’s still below the 570 leases inked in the fourth quarter of 2019.
“We’re not back yet to where we were in 2019,” said Spencer Papciak, research manager at Lincoln. “But we definitely felt an increase in activity at the end of the year.”
About 147 million square feet of office space was leased in metro Atlanta as of Dec. 31, still less than the 153 million square feet leased at the end of 2019, according to Lincoln Property.
Still, the combination of population and job growth, and a steady stream of companies moving to Atlanta, has propelled executives to lease new space or renew leases at existing offices despite continued uncertainty over remote work.
Law firm Bader Scott recently signed a 10-year lease at a Buckhead office building. The firm’s 100-plus lawyers and staff members feed off each other’s energy when they’re working together in person, said Seth Bader, who founded the law firm and represents plaintiffs in personal-injury lawsuits.
“We found that a sense of belonging is important to our team members and you just don’t get that remotely,” added Bader.
Office buildings are adding new tenants faster than spaces are becoming vacant in popular areas like Midtown and the Cobb County corridor, said Christa DiLalo, research director for Cushman’s southeast region. That’s a sign of health for the overall real estate market, she said.
New office towers have helped push leasing levels higher. Railroad operator Norfolk Southern moved into its new Midtown office building at the end of 2021. Tech company Google moved into another Midtown office tower last year.
Pricing has held firm too, she said. Asking rents increased 4.6% on average for metro Atlanta in 2021 compared to 2020.
Companies and organizations of all sizes and throughout the metro region signed leases in the final three months of 2021.
CarMax inked a lease for 110,000 square feet for its automotive finance department at a Kennesaw office building. In Midtown, fintech company Backbase leased 8,700 square feet at Colony Square.
The Society for Human Resource Management, an industry trade group, has said that many companies will let staff sometimes work from home after the pandemic subsides.
Even with a new office lease, the law firm Bader Scott later this year will adopt a hybrid work model. But the office will remain an integral part of the firm’s culture, Bader said.
“We went back and forth on this, but we decided we were more productive” when we have an office,” Bader said. “We thought it was in our clients’ best interest.”
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