ATLANTA-Although the metro area's 505-million-sf industrial market shows a continuing trend of positive absorption and decreasing vacancy in the third quarter, that scenario could change quickly if new construction continues at its current rate, according to a new market study by locally based Colliers Cauble & Co.
"An alarming trend is currently hovering over the Atlanta industrial market," says Colliers Cauble research director Scott Amoson. He notes 13 million sf of new product is under construction with nine million sf without leasing commitments, a predicament that could increase third-quarter's 11.5% vacancy rate in the coming quarters.
"The last time this much industrial space was under construction was back in 2000," Amoson recalls. "The years following witnessed vacancy shooting up 5% in the market, a result of so much empty industrial product delivering to the market during an economic downturn." He says, "Should leasing activity not gain any vigorous traction in the coming quarters, the vacancy rate could likely be headed for an increase as a result of so much product being delivered without significant pre-leasing activity."
Spec-built properties also are "beginning to have an impact on an over-supplied industrial market," Amoson says. For example, he says, the largest delivery scheduled for the fourth quarter is the 810,000-sf Walnut Fork Distribution Center in northeast Atlanta. "To date, none of that space has been leased," Amoson says. A total 58.51 million sf of industrial space is vacant in the flex, shallow bay and warehouse categories.
The 145-million-sf northeast Atlanta submarket led the city with 839,958 sf of space absorbed in the third quarter. Shallow-bay distribution was the product type of choice, accounting for 58% of third-quarter's total 8.74 million sf of total net absorption.
Flex space, the smallest category with 44.5 million sf in 1,056 buildings, had the highest overall vacancy at 15.8%. Shallow bay's 112 million sf was 9.7% vacant. The 353 million-sf warehouse inventory was 11.5%. Quarter-to-quarter rents remained stable with only flex space increasing to $5.50 to $7.50 per sf. Average shallow-bay distribution space stayed the same at $2.75 to $3.75 per sf. Warehouse space was also unchanged from the second quarter at $2.50 to $2.75 per sf.
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