Atlanta Industrial Market 1Q2014 - Cushman & Wakefield

Atlanta Industrial Market Posts Record Net Absorption

Cushman & Wakefield today released first quarter 2014 statistics for the Atlanta industrial market that show overall absorption totaled 5.1 million square feet, one of the strongest quarters in terms of absorption the Atlanta market has seen. This continued positive absorption led to a decline in Atlanta’s overall vacancy rate which ended the first quarter at 8.8 percent, dropping 0.4 percentage points from the 9.2 percent vacancy rate reported one year ago. 

On the other hand, the pace of overall leasing activity lagged last year’s pace, totaling 2 million square feet during the first quarter, down 53 percent compared to total activity reported during the first quarter of 2013. The market’s largest new lease deals in the first quarter included Millennium Mat Company’s 256,700 square-foot lease at 3200 Shawnee Industrial Way in the I-85 Northeast submarket and Dick’s Sporting Good’s 256,600 square-foot build-to-suit lease at 3909 North Commerce Drive in the Airport/South Atlanta submarket.

“The Atlanta market is finally seeing the activity we would expect in a full recovery,” said Ray Stache, a Senior Director for Cushman & Wakefield’s Atlanta industrial practice group. “There is an increasing lack of available existing product in the market. As a result, more build-to-suit projects will occur throughout the remainder of the year. As history has shown, the Atlanta market will build speculative space as increasing demand and lack of existing supply warrant, and we expect to see an increase in plans for speculative construction in the near future.”

The market began to see an increase in overall direct net asking rents, ending the quarter at $3.88 per square foot, up 5.6 percent from $3.67 one year ago.  Overall asking rents in the warehouse/distribution sector have increased 3.8 percent year-over-year to an average of $3.44 per square foot.

Development activity in Atlanta’s industrial market began to pick up with over 4.8 million square feet of projects currently under construction. Notable build-to-suit projects include Procter & Gamble’s 1 million square-foot warehouse/distribution project in the Airport/South Atlanta submarket, Baxter’s 1 million square-foot manufacturing project in the I-20/Snapfinger/Rockdale submarket, and McMaster-Carr Supply Company’s 700,000 square foot warehouse/distribution project in the I-20 West/Fulton Industrial submarket. The only speculative project currently under construction is Majestic Realty Company’s Majestic Airport III project, a 560,625 square-foot warehouse/distribution building located in the Airport/South Atlanta submarket.

Investment sales activity picked up during the first quarter with a total of 5.6 million square feet of industrial product sold, a 104 percent increase compared to first quarter activity reported a year ago.  Notable investment sales included 6600 Governor Lake Parkway, a 388,000 square-foot warehouse/distribution building which sold to KTR Capital Partners in January for $21.25 million. Atlanta’s investment sales pipeline continues to remain strong, with several large deals currently pending and many others on the market.

Highlights:

  • Overall absorption for 1Q 2014 totaled 5.1 square feet, some of the strongest quarterly absorption the Atlanta market has ever seen.  
  • Notably, the I-85 Northeast, I-20 West/Fulton Industrial, and I-75 South/Henry County submarkets captured the strongest absorption of Atlanta’s 10 industrial submarkets.
  • Leasing activity for 1Q 2014 totaled 2 million square feet, down 53 percent compared to activity the Atlanta market posted during 1Q 2013.
  • Overall vacancy (direct and sublease) ended 1Q 2014 at 8.8 percent, down 40 basis points compared to 9.4 percent one year ago.
  • Overall average asking rents ended the first quarter of 2014 at $3.88 per square foot, up 5.6 percent from $3.67 one year ago. 
  • Overall asking rents in Atlanta’s warehouse/distribution sector increased 3.8 percent year-over-year to an average of $3.44 per square foot.
  • Overall investor sales activity totaled 5.6 million square feet in the first quarter, a 104 percent increase compared to first quarter activity reported on year ago.