A Q1 analysis by Atlanta-based King Industrial Realty Inc. puts overall vacancies at 18.8% versus 18.2% in Q4 of 2002. This was the area's ninth straight quarter of vacancy rate increases.

Net absorption was a negative 1.18 million sf compared to a negative 582,419 sf in the previous period and the eighth consecutive quarter of negative net absorption.

"On their face, these vacancy and absorption figures paint a pretty gloomy picture of the first quarter 2003 marketplace," says King analyst and broker Stephen C. Ratchford. But, he says, "It's important to understand that these two statistical indicators reflect the impact of one deal"--the federal General Services Administration vacating more than one million at a distribution facility in the south Fulton County submarket.

Not counting the GSA space, the vacancy rate would have been 18.5% and the net absorption figure would have come in at a negative 155,540 sf, "still negative, but more reflective of a marketplace that has slowed its rate of decline and is getting in position for a comeback," Latchford says.

But the analyst is quick to note, "Any sort of rebound in the marketplace isn't going to happen until there is a marked pickup in demand." He says, "Quite frankly, there aren't many indications that this is going to happen any time soon."

In line with the state of the national economy, "most big companies are still in a downsizing mode, looking for ways to consolidate their distribution channels and creating vacant space in the process," Latchford says. "And if they are major manufacturers, they are busy closing facilities in response to overcapacity, or simply moving their operations overseas."

But there are a couple of bright spots in metro Atlanta's over-loaded industrial market, the broker finds. "While large users leave the market, small companies remain active," he says.

For example, activity in the 20,000-sf-and-less segment is "holding up fairly well, with the result that rents are remaining stable, in contrast to the big-box segment, where more and more good deals are showing up as big blocks of space get dumped on the market," Latchford says.

Also fairly active is the for-sale market. "Largely the result of continuing low interest rates, demand for industrial product is strong among users," the broker says. "Investors are also active, although the current low level of rental rates sometimes generates concern."