Bubble Or Boon? Tech Is Dominating Atlanta's Office Market

Technology companies' impact on Atlanta office market since the Great Recession is undeniable. By some estimates, 35% of the city's office deals this year, and nearly two-thirds of the deals in the past two years, are from tech tenants. 

Despite the Atlanta office market's history of boom-and-bust cycles, when properties were too concentrated in a single industry (think housing in the mid-2000s), technology is viewed as a different animal that will keep Atlanta's job and office markets firing on all cylinders for the foreseeable future.

“My impression is we're in for a longer boom period than normal,” Cushman & Wakefield Director Lawrence Gellerstedt said.

The office market's strength will be helped not only by the growth in tech companies, but also corporate America's adaptation of office uses inspired by tech companies. The new spaces use open floor plans, gathering areas and co-working environments.

“Tech has had a massive impact," Gellerstedt said. "But it's not relegated to the tech sector. It is touching all businesses."

Still, a recent Savills Studley report aired some concern on the office market's reliance on the tech industry for recent growth.

“Dependency on the tech sector is always a concern. In prior cycles, the tech sector, much like finance and energy, has had a tendency to flare up and then flame out,” the report reads. “Potential overlap in the crowded FinTech space is certainly something to keep a close eye on.”

That could be true in the abstract, but Atlanta's economy, both in technology and as a whole, has diversified since the 1990s, Metro Atlanta Chamber Senior Director of Tech Expansion Grant Wainscott said. Aside from financial technology companies — think payment processing — Atlanta has seen an explosion in cybersecurity, mobility, health IT and logistic tech companies as well.

“I think [you've] got to look at how diverse the economy is here and that we're not a one-horse town,” Wainscott said. “Mobility is not going anywhere, regardless of what the housing market is doing. This is what markets all over the world are trying to do. You've got to be able to insulate yourself in times of boom or bust.”

According to Transwestern, some of the largest office deals this year have been on the backs of tech firms: Comcast's 260K SF build-to-suit at The Battery at SunTrust Park, MailChimp's 146K SF offices at Ponce City Market, Equifax's 100K SF deal at One Atlantic Center and Global Payment's nearly 80K SF office at Three Alliance Center.

Many of Atlanta's new skyscrapers and loft office redevelopments are being filled with tech employees, such as Portman Holdings' Coda and the 21-story Anthem Technology Center tower.

While it is difficult to quantify technology company absorption — after all, Anthem is a healthcare company, but its new tower will be devoted to IT — some 35% of the office deals so far in 2017 are tech-related, Transwestern Senior Research Manager Keith Pierce said. Colliers International estimated that as much as 70% of the office deals were directly done by tech companies or by a corporate division focused on some aspect of technology.

“We know that tech is having a significant impact on Atlanta's office market,” Pierce said. “Most companies have a tech component, even if they are engaged in healthcare, banking or nearly any other industry. We see it in the number of innovation centers opening in Midtown or the number of businesses relocating to be near Georgia Tech.”

Savills Studley Atlanta market leader Chris White also dismissed concerns of a tech bubble in Atlanta. The market has matured and diversified, and, when it comes to tech talent, Atlanta is a more affordable option compared to cities like Boston or San Francisco. More than 40,000 local college graduates enter the workforce each year,  according to Studley's report.

“We were involved in the Anthem project, [which is] further evidence of companies looking at Atlanta for technology talent,” White said.

Aside from Georgia's quest to lure Amazon to Atlanta with its proposed $5B HQ2 project, the pipeline of potential economic development deals continues to be robust, Wainscott said.

“I would say that '18 and '19 will see continued significant growth in the cyber and FinTech fields,” he said. The reason: State and regional economic development groups focused many of their incentives on training a skilled workforce for tech company demand over the years. “And we're now really seeing the fruits of those efforts."

New City Properties is underway on 725 Ponce, the redevelopment of what has affectionately been known as Murder Kroger in Midtown into a mixed-use project with Kroger on the street level and 360K SF of office rising above it. The project, expected to deliver in 2019, does not have a tenant committed to the space. 

New City CEO Jim Irwin said he is confident that demand for the project — inside Atlanta's hot Midtown market and across from Ponce City Market — will be there when the building opens.

The demand for new, efficient, tech-inspired space is not strictly for tech companies. Many businesses are seeking locations that offer a robust environment with lots of amenities as a way to lure and retain millennial talent, Irwin said.

“What we found is that technology companies, in particular, are really focused on … growing their platforms quickly and therefore hiring and retaining top talent,” he said. “[But] what you would consider the most traditional types of businesses are waking up and saying, 'Oh, my gosh. We've got to start thinking about taking this cultural shift seriously, or we're going to start losing our talent.'”