One of Atlanta’s most prominent office landlords is optimistic that new, amenity-rich workplaces will retain their cachet despite the rest of the office market’s woes.
Executives for Atlanta-based Cousins Properties spoke Friday on the company’s first-quarter earnings, offering a bullish outlook for its portfolio of high-end offices. The company reported its 14 Atlanta area buildings were 88% leased at the end of March, about 14 percentage points higher than the rest of metro Atlanta, according to data real estate services firm CBRE.
Credit: Courtesy Cousins Properties
Credit: Courtesy Cousins Properties
Cousins CEO Colin Connolly credited the upscale offerings and mixed-use locations of his company’s buildings for outperforming the competition. He predicted that older buildings and those isolated from nearby amenities will continue to struggle.
“Lifestyle office will thrive with improving demand and reduced competition, while the lowest quality commodity office disappears,” he said during Friday’s call with investors.
Most major cities’ office markets have struggled to recover from the rise of remote work and economic uncertainty prompted by the COVID-19 pandemic. Cousins predominantly operates in Sunbelt cities like Atlanta, and its executives say there’s multiple trends helping the Southeast’s office market recoup more quickly than other corners of the country.
Several companies with large Atlanta employee bases, including UPS, Truist and NCR Voyix, have recently announced return-to-office mandates that require workers to clock in five days a week from a physical office.
Leasing activity has also started to increase. More than 2.2 million square feet of office leases were signed in the Atlanta area during this year’s first quarter, the most activity to start a year since 2020 at the start of the COVID-19 outbreak, according to CBRE. Cousins reported similar figures, signing 404,000 square feet of office leases during this year’s first quarter — a 57% increase from the same time last year.
“We are seeing more particularly large companies that had been on the sideline now starting to think about their long-term real estate needs,” Connolly said. “And I think doing so with a view that they’re going to be in the office more often than not.”
About a fourth of Cousins’ first-quarter lease signings were expansions, bolstered by system software firm Workday more than doubling its office footprint at 3350 Peachtree in Buckhead. The lease, which is now 113,000 square feet, is an “important validation of Atlanta and specifically Buckhead as a top place to attract and retain great talent,” said Cousins Executive Vice President Richard Hickson.
However, Cousins does expect to lose some of its occupied space as a result of co-working company WeWork’s pending Chapter 11 bankruptcy proceedings.
Cousins buildings currently house four WeWork locations totaling about 169,000 square feet in Atlanta and Charlotte. Both companies recently agreed to modify the lease at Terminus 100 in Buckhead by reducing its footprint by 24,000 square feet. But Hickson said Cousins is “electing not to negotiate with WeWork” about its lease at 725 Ponce, a trophy tower along the Beltline’s Eastside Trail near Ponce City Market, instead anticipating the lease will be rejected through bankruptcy.
Cousins reported net income of $13.3 million during the first quarter, a 40% decrease from the same quarter in 2023. The company’s stock price remained flat Friday, but had dipped about 2% from the beginning of 2024.
