ATLANTA-Despite 9.74 million sf of new industrial product under development, leasing activity in the metro area's 505-million-sf market is headed for a record 15 million sf this year, according to a new market analysis by locally based Colliers Cauble Co.
At mid-year, net absorption stood at 6.5 million sf, or a one-million-sf increase over the same 2004 period. "The Atlanta industrial market is as strong as it has ever been, in sync with its best performances of the late 90s," says Colliers Cauble research director Scott Amoson. "From a period two years ago with a bleak outlook on the market, to seven consecutive quarters of absorption levels in the millions of square feet, activity has moved forward quite quickly in a short amount of time."
Amoson says "demand for industrial product in Atlanta has continued to strengthen." Vacancy of 11.6% is down 1.8% from this time last year.
"Move-ins and build-to-suits by companies located to the South Atlanta and Northeast Atlanta industrial submarkets have accounted for just over 50% of total market absorption in the metro area for second quarter," Amoson notes. "Current dynamics suggest the Atlanta industrial market will easily top 10 million sf in absorption for the year. The best outlook places the market at a level reaching the 15-million-sf mark."
The researcher considers that performance unprecedented since new construction levels are the highest they have been in five years. Of the 9.74 million sf under construction, 62% is warehouse and 38% is shallow-bay.
Amoson also predicts the overall vacancy rate will fall below 10% by year end. "Vacancy in the market has continued to put downward pressure on rental rates," he says. When the vacancy level drops below 10%, "landlords will begin to see some rate increase for their properties," the analyst says.
Flex industrial rents now are the in the $5- to $7-per-sf range. Shallow-bay and distribution space is renting for $2.75 to $3.75 per sf. Warehouse properties are leasing for $2.50 to $2.75 per sf.
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