Atlanta’s office market is dividing sharply between high-end, institutional-quality Class A and A-plus buildings, which are seeing strong occupancy, and older Class B and C properties, which may never recover to pre-pandemic usage or value. According to Daniel Levison, CEO of this ==Atlanta’s office market is dividing sharply between high-end, institutional-quality Class A and A-plus buildings seeing strong occupancy and older Class B and C properties that may never recover to pre-pandemic usage or value. According to Daniel Levison, CEO of CRE Holdings USA, this split is not a temporary response to pandemic disruptions. It reflects a deliberate corporate strategy: companies now use premium office space as a tool to attract and retain employees, not just as a cost center. As a result, many secondary office buildings face long-term challenges beyond temporary vacancy rates, raising questions about their future use and value.
“If you are focusing on institutional quality, Class A, Class A-plus buildings in each one of the submarkets, they do very well, and the space is beginning to tighten up,” Levison says. “It’s a flight to quality.”
Office Space as a Retention Tool
The tightening of Class A office space is driven by selective tenant demand for the best buildings in each submarket, not by a broad-based office recovery. Companies bringing employees back to the office are offering upgraded space as a benefit, making the work environment more attractive than pre-pandemic offices. Rather than relying on mandates, companies are using premium space as an incentive to ease the transition back to in-person work.
Levison says this is a response to the bargaining power employees gained during the pandemic. Instead of issuing return-to-office mandates, companies are telling workers: “We’re going to rent some new office space. It’s going to be in the nicest office building in our submarket.”
This strategy benefits companies with the financial resources to pay higher rents and landlords who own trophy assets. However, the strategy concentrates demand in a small subset of buildings, leaving the rest of the market behind. In Atlanta, Class A buildings in submarkets like Buckhead, Midtown, and parts of the Perimeter are approaching or exceeding pre-pandemic occupancy rates. Meanwhile, Class B and C buildings in the same areas are struggling to retain or attract tenants.
Levison is clear that this is not a short-term disruption. Levison believes most Class B and C buildings will not return to the 85–90% occupancy rates they maintained before 2020. “Class B, B-minus, Class C buildings, they’re going to struggle. They’re continuing to struggle,” he says. Owners of these properties are increasingly considering alternative uses, given the low likelihood of regaining high occupancy.
Valuation Challenges for Secondary Office
This permanent bifurcation creates a serious valuation problem for secondary office properties. Traditional underwriting assumes stabilized occupancy and market rents. If those assumptions no longer hold, with occupancy stabilizing at 60–70% and rents under pressure from competing Class A options, property values drop sharply.
Owners of Class B and C buildings now face a difficult choice: continue operating the property as office space with reduced income or pursue expensive conversions to residential, life sciences, or specialty commercial uses. Converting office buildings to residential use is often cost-prohibitive. These buildings were not designed for apartments, and retrofitting them can require more capital than the property is worth. In many cases, demolition and redevelopment may be the only financially viable option.
Levison notes that even in good times, managing and leasing secondary office space is challenging. “Most people make money when they sell an office building in good times, not running it day to day,” he says. Office buildings often rely on appreciation for returns. Constant tenant turnover, retrofits, and maintenance costs complicate day-to-day operations.
With appreciation now unlikely and operating margins under pressure, owners of secondary office buildings must choose between holding an underperforming asset or selling at a steep discount. Buyers of these properties tend to be opportunistic investors seeking alternative uses or willing to accept lower returns in exchange for potential long-term upside.
Industrial Offers More Stability
CRE Holdings USA focuses exclusively on small-bay industrial properties, viewing them as safer and more stable investments than office or retail. The contrast between sectors is clear: office landlords face shrinking demand and obsolete space, while industrial landlords contend with limited supply and rising replacement costs.
“We think there’s less volatility in it,” Levison says of the industrial sector. “There’s always going to be a need for storing products and making products.”
Industrial demand is anchored by the need for physical space to manufacture, store, and distribute goods. Unlike office space, which can be replaced by remote work, or retail, which can be displaced by e-commerce, industrial facilities remain essential. Federal policy encouraging onshoring of manufacturing adds further support, as businesses seek new space for domestic production. Recent federal legislation has introduced meaningful incentives for manufacturers to purchase or build their own facilities — a development Levison says directly benefits his firm’s focus on small industrial buildings under 50,000 square feet.
CRE Holdings USA has sharpened its development thesis around large manufacturing plant announcements. The firm holds land near Scout Motors in Columbia, South Carolina, near the Rivian plant outside Madison, Georgia, and is evaluating sites along I-16 near the Hyundai facility. The strategy is built on a consistent pattern: a major plant creating 3,500 or more jobs draws roughly 10,000 new residents to a region, overwhelming local service businesses and generating demand for small warehouse and light manufacturing space.
Levison reports that CRE Holdings USA has lost money on only one or two deals out of about 30 over the past two decades, a track record he attributes to the durability of industrial demand and disciplined underwriting. Even so, acquiring existing industrial buildings at reasonable prices has become difficult. Prices have doubled since before the pandemic. As a result, CRE Holdings USA is focusing more on ground-up development.
“I have my first building under contract in four years — an existing building we’re going to fix up and sell to a user. I used to buy three or four a year before the pandemic, and prices have doubled,” Levison says.
Risks and Opportunities for Investors
For investors considering office properties, the current market presents both risk and opportunity. Class A buildings in strong submarkets may offer stability, but they are expensive and offer little room for price appreciation. Class B and C buildings can be acquired at deep discounts. Still, they come with high execution risk and the real possibility that they will never regain the occupancy levels needed to justify even their reduced prices.
Levison acknowledges that office assets may offer higher percentage returns than industrial assets, simply because office values have fallen so far. However, Levison warns that office properties are difficult to operate. Most investors make their money on the eventual sale, not through ongoing operations. “I’ve invested with a couple of groups in office buildings, but that’s all they do, just like all I do is industrial,” he says. Office investing requires specialized expertise, and generalist investors are likely to struggle with operational challenges and market volatility.
Levison also notes that today’s investors are more cautious overall. Raising capital has become harder as economic uncertainty weighs on decision-making. For investors who do commit, Levison recommends spreading exposure across multiple deals rather than concentrating in one. His standard guidance: take the total amount an investor plans to commit over two to three years, divide it by three, and deploy it incrementally across successive deals.
CRE Holdings USA’s strategy is to avoid office entirely and specialize in small-bay industrial, where the firm has deep experience and a repeatable deal structure. This reflects a broader trend in commercial real estate. Successful firms are narrowing their focus and building expertise in a single property type, moving away from diversified portfolios that span multiple asset classes.
Atlanta’s Office Market Outlook
This widening gap defines Atlanta’s office market outlook. The flight to quality is likely to continue, with Class A buildings capturing the bulk of tenant demand and maintaining high rents. Secondary office stock faces an uncertain future, with declining occupancy, falling rents, and rising operational costs.
Owners of Class B and C buildings will be forced to make tough decisions: hold and accept reduced income, sell at a loss, or invest heavily in conversions that may not pencil out. The market is likely to see more distressed sales, redevelopment projects, and creative reuse proposals over the next several years.
For investors and landlords, these trends underscore the importance of specialization, operational expertise, and realistic underwriting. The days of relying on broad-based office demand are over. Success will depend on identifying which assets can still compete and which are destined for obsolescence.
