Development activity rapidly picked up steam in the Atlanta industrial market as it posted a new record of 16.9 million square feet of space under construction as of the end of the first quarter of 2015, topping the previous record of 15.3 million square feet set in the fourth quarter of 2015, according to Cushman & Wakefield’s first quarter 2015 industrial report.
“As Atlanta’s industrial market continues to tighten, creating a lack of supply of big box options for warehouse/distribution space, the race is on for developers to deliver speculative product in order to keep up with the momentum of tenant demand in Atlanta,” said Chris Copenhaver, a Director with Cushman & Wakefield’s Industrial Services Group.
Notable speculative projects include the 1.1-million-square-foot speculative warehouse/distribution project at 212 Bohannon Road in the Airport/South Atlanta submarket and the 1-million-square-foot speculative warehouse/distribution project at 11510 Lewis Braselton Boulevard in the I-85 North submarket. Notable build-to-suit projects include Kroger’s 1.3-million-square-foot warehouse/distribution project in the Airport/South Atlanta submarket and Walmart’s 1.2-million square-foot warehouse/distribution project in the I-20/Snapfinger/Rockdale submarket.
In addition, year-to-date overall absorption totaled 3.1 million square feet. This continued positive absorption led to a decline in Atlanta’s overall vacancy rate, which ended the first quarter at 7.7 percent, dropping two percentage points from the 7.9 percent vacancy rate reported at 2014 year-end.
Overall leasing activity totaled 3.6 million square feet, a 55 percent drop compared to the record leasing activity reported during the first quarter of 2014. The market’s largest new lease deals in the first quarter included Reckitt Benckiser’s 714,965-square-foot build-to-suit lease at 345 Toy Wright Road in the I-85 Northeast submarket and IntegraCore’s 353,400-square-foot build-to-suit lease at 7280 Oakley Industrial Boulevard in the Airport/South Atlanta submarket.
The market continued to see an increase in overall net asking rents, ending the quarter at $4.03 per square foot, up 0.8 percent from $4.00 reported at 2014 year-end. Overall asking rents in the warehouse/distribution sector have increased 0.9 percent over the same time period to an average of $3.51 per square foot.
Investor sales were off to a slower start compared to the strong activity posted during the same quarter last year, with a total of 2.3 million square feet of industrial product sold during the first quarter, a 61.2 percent decrease from a year ago. Notable investment sales included 435 Henry Robinson Boulevard, a 398,485-square-foot warehouse/distribution building which sold to DCT Industrial Trust in January for $15.6 million and 1346 Oakbrook Drive, a six building, 302,250-square-foot portfolio which sold to Agellan Capital Partners Inc. in February. Atlanta’s investment sales pipeline continues to remain strong, with several large deals currently pending and many others on the market.
Industrial First-Quarter Highlights:
- Industrial inventory under construction as of the end of the first quarter of 2015 totaled 16.9 million square feet, marking a new record for the Atlanta market.
- Leasing activity for 1Q 2015 totaled 3.6 million square feet, a 55 percent decrease compared to the first quarter of 2014.
- Overall absorption for 1Q 2015 totaled 3.1 million square feet, a 47 percent decrease from 1Q 2014.
- Overall vacancy (direct and sublease) ended 1Q 2015 at 7.7 percent, down 0.2 percentage points compared to 7.9 percent at 2014 year-end.
- Notably, the I-85 North and the Airport/South Atlanta submarkets captured the strongest absorption of Atlanta's major industrial submarkets.
- Overall net average asking rents ended the first quarter of 2015 at $4.03 per square foot, up 0.8 percent from 2014 year-end.
- Overall investor sales activity was off to a slow start, totaling 2.3 million square feet in the first quarter, a 61 percent decrease compared to the pace of last year.