Industrial Market Rallies With Strong Q2

Overall vacancies dropped to 14.6% from 15%, with the majority of new leases occurring in the bulk warehouse sector which typically accounts for 90% of year-to-date absorption, says Colliers Cauble research director Scott Amoson. "Mid-year 2004 numbers reflect the positive activity expected and sensed by the commercial real estate community."

The market experienced positive absorption of 2.8 million sf in the second quarter, bringing the year-to-date total to nearly 1.6 million sf and overcoming first quarter's net loss of over one million sf. "Much of this quarter's absorption can be attributed to transaction in the market finally coming to fruition," Amoson says.

"Because the deals have been taking longer to close, much of the activity occurring has been delayed in being reported," he says. "Now that some of these leases have been executed, absorption levels skyrocketed in the second quarter and a more accurate representation of the Atlanta industrial market for the first half has occurred."

Among the larger leases were Clorox Co. signing for a 607,650-sf build-to-suit under construction at the Camp Creek Trade Center in South Fulton County; Del Monte Corp., signing for a 780,000-sf build-to-suit under construction at Airport Majestic Center, also in South Fulton County; and BrandsMart USA taking 226,000 sf at South Park in Clayton County.

Amoson finds "the most encouraging note for this quarter is the long-awaited improvement in the shallow-bay and distribution market segment." Industrial tenants absorbed almost 900,000 sf of this product, breaking the trend in negative absorption over the few quarters. "This turnaround signifies the final piece of the puzzle needed for the Atlanta industrial market to be in full recovery," the researcher says.

Despite the improved vacancy figures, landlords are still offering "a lot of concessions in the form of free rent," Amoson notes. "Leasing rates will stay relatively 10% to 20% lower than normal and are not expected to be vary much until the vacancy rate is closer to 10%."

Average asking base rates for flex industrial space is $5 to $7 per sf; show-bay and distribution space, $2.75 per sf to $3.75 per sf; and warehouse, $2.50 per sf to $2.75 per sf.