Office Leasing Abruptly Slows in Atlanta

ATLANTA—Newmark Knight Frank’s Q1 Atlanta office report, due out in a few days, will show that 1.8 million square feet were delivered, the largest quarterly total in five years. However, as the COVID-19 pandemic took hold, leasing activity saw a significant slowdown in March, which will result in a decrease in executed transactions over the next 3-6 months. Construction activity will become more intermittent as permitting divisions at local jurisdictions are slower to inspect and approve projects, with softening fundamentals over the next 6-9 months until business operations are back to normal.

“The effect is people are now working for home and we really won’t see the impact of this until April when people start paying rent,” Sean Moynihan, Newmark Knight Frank EVP and Atlanta Market Leader, tells GlobeSt.com. “That’s what we are anticipating from our conversations with tenants and landlords and banks. The consistent message out there is everything is waiting for that shoe to drop on April 1.”

Projects under construction, but not yet occupied will be impacted, Moynihan says.

“With permitting offices not open, you can’t get inspectors out there. That’s the kind of things we are operating under right now. There’s a ripple effect of people not being in their places of work to keep things going at the speed they normally would.”

Will some companies ultimately opt for smaller offices as a result of the pandemic? Moynihan says he straddles the fence on that.

“I enjoy going into the office. There’s an element that’s missing when working from home. Being in the office is a critical component of a company’s culture as is collaborating and communicating. The question is how do you create a flexible structure? We may have people come out of it and say that that work at home project was disastrous. Others will say it’s the best thing. It will be evaluated company by company. The easy answer is that square footage will be reduced, but I don’t know.”

Looking ahead, Moynihan stresses optimism.

“This is going to pass. We are going to get back to work and when we do, it’s about being ready to help our clients. Right now, we’re in a wait-and-see stage. When we come out of this, people will have money to invest, people will want to sell assets and people will have leases coming due. Real estate is always there, whether we are on pause or not. I anticipate things are going to spike when we get back to our normal speed.”