A prominent office landlord said its high-end towers across the Sunbelt are seeing strong demand, especially in metro Atlanta.
Executives for Atlanta-based Cousins Properties pointed to several balance sheet metrics to argue its portfolio of luxury offices across the Southeast are outperforming an otherwise struggling market.
From increased parking revenues to upticks in office use, Cousins leaders said there are several tailwinds helping accelerate leasing activity, with the company’s home city as a prime example. Cousins reported its 14 Atlanta area buildings were 88% leased at the end of June, about 15 percentage points higher than the rest of metro Atlanta, according to data real estate services firm CBRE.
“Leasing velocity was excellent, with Atlanta leading the way,” Cousins Chief Financial Officer Gregg Adzema said Friday during the company’s second quarter earnings call.
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, from Charlotte to Phoenix, which its executives said are seeing more office leasing activity than other corners of the country.
Credit: Courtesy Cousins Properties
Credit: Courtesy Cousins Properties
Cousins CEO Colin Connolly said his company’s portfolio of upscale offices, typically called Class A or trophy, are poised to see even more demand in the coming years, because the office market’s woes has slowed construction of new workspaces. Less than 1.4 million square feet was under construction in metro Atlanta as of June, according to CBRE.
“In simple terms, demand is increasing while supply is decreasing,” Connolly said. “This will lead to a rebalanced market. It’s economics 101.”
Metro Atlanta saw a stark uptick in leasing activity during the second quarter, especially large transactions. Eight leases of at least 90,000 square feet were signed between April and June, according to real estate services firm JLL. About 4.7 million square feet of office leases were signed in the Atlanta area during this year’s first half, the most activity to start a year since 2020 at the start of the COVID-19 outbreak, according to CBRE.
But, about one-third of all office space in the Atlanta area is either vacant or available for lease, a historic high.
Cousins activity across its portfolio has been more consistent than the broader market. The company signed 391,000 square feet of office leases during this year’s second quarter — roughly in line with the prior quarter, but a 10% decrease from the same time last year.
Atlanta accounted for 142,000 square feet of second-quarter lease signings, including nine new leases and expansions. It was only 5,000 square feet less than 2023′s second quarter. Cousins Executive Vice President Richard Hickson said the activity shows Atlanta remains a desirable office market and that companies are beginning to commit to real estate decisions.
“(There are) customers that have not been willing to make long-term decisions to date, but (they) are now definitely ready to and moving aggressively to lock in their long-term real estate,” he said.
Cousins’ overall portfolio is nearly 89% occupied, up about a percentage point over the start of the year.
Cousins also announced last week it acquired two mezzanine loans totaling up to $37 million, which are backed by office properties in Nashville and Charlotte. Connolly said the loans were off-market transactions, adding that Cousins is always evaluating “a wide variety of opportunities, including debt structure transactions, joint ventures and property acquisitions.”
Cousins reported net income of about $8 million during the second quarter, a 66% decrease from the same quarter in 2023. After the 10 a.m. Friday call with investors, the company’s stock price increased about 4% by the day’s end. Cousins’ stock has increased about 3% from the beginning of 2024.
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