Atlanta Office Market Signals Gradual Recovery with Robust Class A Demand Amid Class B Challenges

EXECUTIVE SUMMARY

The Atlanta office market displayed encouraging signs of a slow but steady recovery in Q3 2025, propelled by strong Class A demand and bolstered by a surge in leasing activity, though Class B properties continued to temper overall progress. Net absorption dipped into negative territory at -84,246 sq. ft., a reversal from Q2 2025’s positive 14,561 sq. ft. However, Class A spaces shone with a solid 236,038 sq. ft. of positive absorption, while Class B properties recorded a significant decline of -320,284 sq. ft., highlighting the ongoing divide between premium and secondary office segments.

The overall vacancy rate edged down to 26.5% from 26.9% in Q2 2025, signaling a stabilizing market. Sublease availability continued its downward trend, falling to 2.4 million sq. ft., an 11.8% drop from 2.7 million sq. ft. in Q2 2025 and down from 3 million sq. ft. a year ago, suggesting sublease space has likely crested. With 250,000 sq. ft. delivered in third quarter and construction activity contracting to 342,179 sq. ft. (a reduction from Q2’s 565,367 sq. ft.), limited new supply is supporting this stabilization.

Rental rates saw a slight dip to $32.38 per sq. ft., down 0.1% from $32.41 in Q2 2025 but up 3.4% from $31.32 in Q3 2024. Class A rates rose to $34.35 per sq. ft., while Class B rates held steady at $25.18 per sq. ft., reflecting sustained demand for high-quality spaces. The robust leasing activity, strong Class A absorption, and constrained supply underscore a gradual recovery for premium office segments, though Class B struggles continue to signal a bifurcated market.

SUPPLY & DEMAND

KEY MARKET INDICATORS

MARKET OVERVIEW

ATLANTA ECONOMIC UPDATE

The unemployment rate for the Atlanta metro area stood at 3.7% in July 2025, remaining well below the national average of 4.6%, according to the U.S. Bureau of Labor Statistics (BLS) Local Area Unemployment Statistics. Total nonfarm employment in the Atlanta area reached 3.124 million jobs in July 2025, reflecting a 0.7% increase from July 2024, as reported by the BLS Current Employment Statistics.

Job growth accelerated modestly, with 21,200 jobs added over the past year, showing gains in key sectors such as education and health services, financial activities, and leisure and hospitality. Counties including Cobb (3.5% unemployment), DeKalb (3.6%), Fulton (3.9%), and Gwinnett (3.4%) continue to anchor this economic vitality through competitive wages—averaging $1,533 weekly, surpassing the U.S. figure of $1,507—and consistent employment expansion. Looking ahead, Atlanta’s advantages in cost of living and business operations relative to coastal hubs sustain its status as a magnet for companies and talent.

LEASING ACTIVITY SURGES 41% FROM PRIOR QUARTER

Leasing activity soared to 2.1 million sq. ft. in Q3 2025, a 41% increase from 1.5 million sq. ft. in Q2 2025 and a 3% uptick from 2 million sq. ft. in Q3 2024. Class A properties led with 1,724,676 sq. ft., while Class B contributed 370,371 sq. ft., reinforcing a clear preference for premium spaces. This robust leasing momentum, particularly in high-quality assets, points to growing confidence in Atlanta’s office market recovery. Notable new leases signed in Q3 2025 include UPS Supply Chain Solutions’ massive 310,000 sq. ft. sale-leaseback at Parkview IV , Ernst & Young signing for 102,195 sq. ft. at the newly completed 1020 Spring St – Ten Twenty Spring at Spring Quarter , and Rivian signed a 45,000 sq. ft.(which is new to the market) lease at Junction at Krog District.

CLASS A STRENGTH PERSISTS, CLASS B LAGS BEHIND

Net absorption fell to -84,246 sq. ft. in Q3 2025, down from Q2 2025’s positive 14,561 sq. ft. Class A properties, however, maintained strong performance with 236,038 sq. ft. absorbed, driven by gains in submarkets like Northwest (211,974 sq. ft.) and Midtown (160,321 sq. ft.). In contrast, Class B properties saw a loss of -320,284 sq. ft., with notable declines in Northlake (-85,779 sq. ft.) and Northwest (-96,747 sq. ft.). This divergence underscores Class A’s role as a market leader, while Class B continues to drag overall performance.

VACANCY RATE TICKS DOWN, SUBLEASE SPACE CONTINUES DECLINE

The overall vacancy rate improved to 26.5% from 26.9% in Q2 2025, though it remains above Q3 2024’s 26.1%. Direct vacancy dropped to 25.0% from 25.2%, and total availability fell to 27.8% from 28.7% last quarter. Sublease space continued its significant decline to 2.4 million sq. ft. from 2.7 million sq. ft. in Q2 2025, down 11.8%, reinforcing signs that excess sublease inventory is waning. These trends, combined with limited new supply, point to a market gradually finding its footing.

DELIVERIES RISE, CONSTRUCTION PIPELINE SHRINKS

Q3 2025 saw the delivery of 250,000 sq. ft. of new office (100% pre-leased to Truist Securities), up from zero deliveries in Q2 2025 and 123,459 sq. ft. in Q3 2024. The construction pipeline contracted to 342,179 sq. ft., a 40% decrease from 565,367 sq. ft. in Q2 2025. Key submarkets—Midtown (224,000 sq. ft.), Northwest (43,367 sq. ft.), North Fulton (48,000 sq. ft.), and Northeast (26,812 sq. ft.)—account for the entire pipeline. This restrained construction activity, paired with modest deliveries, continues to support vacancy stabilization and fosters optimism for Class A recovery.

RENTAL RATES HOLD NEARLY STEADY

The average annual rental rate (FSG) dipped slightly to $32.38 per sq. ft., down 0.1% from $32.41 in Q2 2025 but up 3.4% from $31.32 in Q3 2024. Class A rates climbed to $34.35 per sq. ft., while Class B rates remained flat at $25.18 per sq. ft. Midtown commanded the highest rates at $42.91 per sq. ft., followed by Buckhead at $39.06, with I-20 East trailing at $22.95. The stability in rental rates, alongside strong Class A demand, reflects a cautious but positive outlook for premium submarkets.

INVESTMENT SALES TRENDS

In the third quarter of 2025, the Atlanta office market recorded an average sale price of $207 per sq. ft. and an 8.7% average cap rate. Notable sales transactions include Fortress Net Lease REIT purchasing the 310,000 sq. ft. Parkview IV property from United Parcel Service for $93.2 million ($300.63 per sq. ft.). This transaction was structured as a sale leaseback, with the property being 100% occupied at the time of sale. OA Development acquired the 249,455 sq. ft. 100 City View building from Granite Properties for $50.4 million ($202.04 per sq. ft.). This Class A property was 91% leased at the time of the sale.  Also, Paces West, a 651,741 sq. ft. Class A property in Cumberland/Galleria was sold by Farallon Capital Management

For More Information, Contact:

Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]