Post Pandemic Commercial Construction and Real Estate Markets Positive

Over 18 years in commercial real estate ownership, brokerage, and construction, one cliché holds. Office tenants are not a solid. They are a gas. They fill any container you put them in. That’s good news for the office markets here in Atlanta!

Virtually all office landlords, brokers, property managers, and construction companies here in Atlanta and elsewhere are curious about how the new work from home trend in response to the pandemic will play out over the long term. They are watching closely to see how it will affect demand on office space over the next several years. There are a number of conflicting signs, some positive and some concerning for office building ownership and owner representatives. 

On the positive side we have seen Class A rents remain relatively stable. Anecdotally, we at Lexdyn have not seen a trend toward major landlord concessions in order to keep occupancy high, although I’m sure there are individual exceptions. Based on conversations with office landlord reps, free rent concession remains about one month of free rent per year of lease, added to the end of the term. This is when such a concession is offered at all. One month per year is a pretty standard landlord concession for decent footprints with credit tenants. Obviously, all the disclaimers about the various types of concessions and incentives that exist in complicated real estate transactions apply to that statement.

On the negative side, we have seen absorption rates drop and vacancy rise over the last couple of quarters, but even those numbers are a bit misleading. The Microsoft move from Midtown to Atlantic Station has temporarily added a huge amount of square footage to the market, but after everything settles down, market experts agree that move will be a huge net positive for both Midtown and Atlantic Station. Further, Microsoft and Google both seem to make almost weekly announcements about new land acquisitions throughout the MSA as they continue to invest in Atlanta as the east coast hub for tech. All of this is nothing but good news for our market. A rising tide, after all. 

As for construction, the skyline says it all. There are cranes in just about every direction as new apartment towers are completed and new sites are cleared. It’s not just high rise multi-family either. The office interiors market is poised to see big growth in the next six quarters as COVID-19 gets fully and effectively behind us and decisions about space that have been put off over the last five quarters get made. Lexdyn remains in discussions with designers and architects throughout the region and all are very busy with test fits, layouts, and preliminary pricing. This flurry of activity is going to lead to interiors projects large and small. 

The contractor market remains competitive, and margins remain tight as general contractors and trade partners adjust to deal with surging commodities and materials prices and jockey for work. Having said that, as pent-up demand is released, and as global supply chains adjust to fill the post COVID-19 demand, margins will naturally rise a bit. 

In short, it’s a great time to be in the commercial construction and real estate world here in Atlanta and if there’s one theme to take from the current conditions, it’s that we are revving our engines and just waiting for that flag to drop. Companies like Lexdyn, who have taken the opportunity to invest in their operations and prepare for the growth are in the best position to deliver superior product to a market that will be thirsty for it as companies and people move to our city to take advantage of the favorable economic and social conditions. 

Are you ready? We are! 

Lexdyn is a commercial construction company specializing in new office, medical and clinic space, adaptive reuse, sports and entertainment, and data center projects. Right now we are most competitive on projects ranging from $500k to $6M. Lexdyn’s leadership boasts over 100 years of experience in construction, and we are on the grow! Contact us to talk about how our team of experts can add value to your project!