There has been plenty of chatter among office landlords about the market's long-awaited recovery, but one of the nation's largest such firms is among the few heavily buying into the anticipated rebound.
Cousins Properties invested nearly $1 billion in offices during the fourth quarter, making the period "one of the most productive" in the Atlanta-based real estate investment trust's history, Chief Executive Officer and President Colin Connolly said in a statement.
The company scooped up three trophy office properties in the second half of 2024, issuing a signal to the rest of the market that larger players are emerging from the investment sidelines. Cousins executives said its recent buying spree will help position the company for growing demand among tenants for top-tier office space, a trend already unfolding across the developer and landlord's Sun Belt-focused portfolio.
In December alone, Cousins closed on its nearly $522 million deal for the iconic Sail Tower in downtown Austin, Texas, as well as its $328.5 million purchase of the Vantage South End, a two-building office campus in Charlotte. Both of those followed closely behind the REIT's more than $80 million acquisition of a trophy office tower in midtown Atlanta, which was finalized in August.
All told, the landlord collectively added nearly 2 million square feet of offices to its portfolio in the back half of 2024.
The company's recent acquisition activity — with plans to extend it through 2025 — emboldens Cousins' position at the forefront of a growing cohort of national office landlords looking to pursue deals.
Chasing demand
Most larger, institutional-level buyers have been absent from the office investment market as they have spent the past several years waiting for the right balance of improving economic conditions and attractive prices.
The widespread valuation reset has been playing out across many of the nation's largest office markets, largely attracting a cohort of smaller, privately held investors more willing to make a risky bet while pricing resettles.
More price certainty and sale comparables have meant larger buyers such as Cousins are now reopening their wallets as they begin to consider their own potential plays to help position their office portfolios at the forefront of what many say is a strengthening office market.
Over the past couple years, office landlords across the United States have pointed to their lineup of top-tier properties as a saving grace from the occupancy and leasing pitfalls plaguing owners of lower-quality assets. While the pool of companies signing new office deals has shrunk considerably since the pandemic's 2020 outbreak, the tenants that are willing to commit to space have homed in on high-quality real estate options as a tool to both aid in their return-to-office strategies and to help boost and retain talent.
Property owners with buildings on the higher end of the quality spectrum are benefitting as vacancy rates for the upper tier of the segment is about 13% compared to roughly 19% for the rest of the market, according to CBRE data. What's more, asking rents for premier office space is more than 50% higher than the rest of the market, up from the 40% premium landlords were able to command three years ago.
For Cousins, that prioritization of well-located, highly amenitized spaces has helped boost its portfolio occupancy rate to 89.2%, marking a consistent rise since the 87.3% average it reported by year-end 2022. Its tenant base is concentrated on a mix of technology, financial and professional services firms, with some of the largest names including Amazon, Google parent company Alphabet, ExxonMobil and Bank of America, according to details filed with the Securities and Exchange Commission.
Cousins reported more than 460,000 square feet of office leases in the final quarter of 2024, boosting its annual deal volume to more than 2 million square feet. By comparison, it inked less than 1.7 million square feet of deals for all of 2023.
The developer's footprint includes more than 21.1 million square feet of rentable office space in markets such as Atlanta; Dallas, Houston, and Austin; Tampa; Charlotte; and Phoenix.