Speculative construction is returning to Atlanta. Developers have responded to the metro’s consistently low vacancies, above-average rent growth, and impressive leasing velocity by breaking ground on a number of major projects in recent quarters. Many of those deals are at least partially speculative, and there is even more spec supply in the planning stages. Roughly 45% of office space under construction is unleased, while earlier in the expansion, spec construction was virtually nonexistent.

Net completions have not weighed too heavily on the market during this expansion. Customarily, a net of about 5.3 million SF of office space is added to the Atlanta metro on an annual basis, compared to less than 1 million SF annually since 2010. However, about 2 million SF has delivered annually over the past three years, and with 7.4 million SF under construction, the metro is set to expand at one of the fastest rates in the country on a nominal basis over the next few years.

A large portion of the recently delivered or under-construction spec is concentrated in Midtown. Projects like 1105 WP (664,000 SF), Atlantic Yards South (367,000 SF), and T3 West Midtown at Atlantic Station (232,000 SF) have large blocks of available space. The projects that are advertising rents are asking north of $40/SF triple net, some of the highest rents in the metro. In Buckhead, the 340,000-SF One Phipps Plaza broke ground in early 2019 on a purely speculative basis.

Pending projects in Atlanta are hoping to follow in the footsteps of 725 Ponce, which sits adjacent to the Atlanta BeltLine and Ponce City Market. That project delivered 100% vacant in mid-2019 but quickly landed BlackRock, McKinsey, Chick-fil-A, Slalom LLC, PagerDuty, and WeWork to sizable deals, bringing it to 100% leased by the end of the year. Asking rents at 725 Ponce came in above $40/SF triple net.

Build-to-suits were more common earlier this expansion, but there are still a handful of major single-tenant facilities in the pipeline. One of the biggest projects in recent years is State Farm’s campus in the Central Perimeter. The first 600,000-SF building delivered at the end of 2016, at which point employees started to vacate the more than 1 million SF they occupied while waiting for their new home. The second 670,000-SF phase of the insurance giant’s campus opened in early 2020, and the third and final building should deliver in 2021. Other major build-to-suits include those for NCR, Cox Communications, and Mercedes-Benz, and offices for Norfolk Southern and Anthem are underway according to Costar.