Atlanta Office Market Sees Record-Low Leasing Activity as Renewals Dominate Amid High Costs

Atlanta's office market experienced its slowest leasing quarter since Q1 2023, primarily driven by a significant increase in lease renewals. Six of the top ten largest leases in the third quarter were renewals, including major deals for BakerHostetler (88,000 SF) and Acuity Brands (49,000 SF) at The Proscenium tower in Midtown. Overall, renewals constituted nearly 78% of the 920,000 square feet of leasing activity.

The trend is largely attributed to elevated construction costs, with materials prices rising over 13% year-over-year nationally. This makes tenant build-outs prohibitively expensive, pushing companies to renew existing leases rather than incur significant out-of-pocket expenses for new spaces. Additionally, Metro Atlanta saw zero new office projects of significance underway in the third quarter, a first in 15 years, limiting available options for tenants seeking new locations.

Despite the lack of new construction, existing landlords are benefiting. The overall office vacancy rate in Atlanta fell 140 basis points to 26%, and average rents surged 3.8% year-over-year to $35.22 per square foot, with Class-A spaces nearing $38 per square foot. This environment means developers face high barriers to entry for new projects, while existing property owners can command higher rents and maintain occupancy through renewals.