ATLANTA—After an impressive 17.4 million square feet of absorption in 2014—the second-highest net absorption in the nation— Atlanta's industrial market is still thriving in the first quarter of the year, according to CBRE's latest report. The ongoing positive absorption—combined with the lack of spec deliveries—has both limited the availability of big block industrial space in Atlanta and started impacting secondary spaces.
"Class A products for office and industrial still lead the pack with regards to net absorption and rental rate increases,” Travis Deese, senior research analyst with CBRE's Atlanta office, tells GlobeSt.com. “As vacancy in industrial properties has been suppressed over the past year and a half, this has triggered new development in the form of build to suit projects and speculative product.”
Atlanta saw 4 million square feet of industrial absorption in the first quarter of 2015. CBRE reports market fundamentals are advancing despite the tightening market conditions.
More than 80% of new industrial leasing activity during the first quarter of 2015 consisted of spaces smaller than 150,000 square feet. Building materials and construction manufacturing companies were two of the primary drivers of leasing activity in the quarter. At the same time, strong demand for single-family and multifamily housing has convinced construction companies to increase their presence in the market and prepare for future growth in their industry.
Developers are currently focused on increasing the inventory of Atlanta's core industrial submarkets: Fulton Industrial/Southwest Atlanta, Airport/South Atlanta, and Northeast/Interstate 85. The metro Atlanta area posted 4,159,177 square feet of positive net absorption in the first quarter 2015. The South Atlanta submarket led the metro area with 2,147,829 square feet, followed by the Fulton Industrial submarket with 885,573 square feet.
Overall, the industrial vacancy rate decreased to 8.7% in the first quarter of 2015. This is significantly less than 11.1% in the year-ago period. Warehouse product, which represents 68.8% of the Atlanta market, saw vacancy decrease from 9% to 8.4%.
Even with speculative product dominating the current construction boom, build-to-suit development is still active in Atlanta. With the build-to-suit and speculative projects in the pipeline, Atlanta will not only be able to continue accommodating smaller users, CBRE concluded, but will also be more receptive to large block users in 2015.
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