Atlanta Industrial Hasn't Seen This in 16 Years

ATLANTA—Atlanta just posted one of its best-ever years on the industrial real estate front. In 2014, Atlanta just posted its highest total net absorption in 16 years, with 17.4 million square feet of leasing, according to a CBRE report.

To put that into perspective, only two other years saw stronger performance in Atlanta's industrial market history. In 1997, Atlanta saw 18.2 million square feet of industrial space absorbed and in 1998 the market saw 19.6 square feet of absorption.

“Big block leasing was responsible for a great deal of the space absorbed,” says Dan Wagner, CBRE Southeast Research Director. “We saw 11 new leases of over 100,000 square feet each. The primary drivers behind the big block absorption remain third-party logistics companies and other forms of logistics.”

Looking at the fourth quarter alone, net industrial absorption hit 8.3 million square feet. That marked the single strongest quarter in Atlanta's history on the industrial commercial real estate front. Over 6 million of the activity is attributable to new leases and owner or user sales of existing buildings. The remaining 2.3 million square feet are tied to three completed and occupied build-to-suit projects.

The overall industrial vacancy in Atlanta dropped to below 10 percent for the first time in nearly 14 years, according to CBRE Research. The vacancy level has not been as low since the third quarter of 2001.

“Significant absorption and build-to-suit deliveries were the driving forces behind the drop in market vacancy,” Wagner says. “Going forward, the rise in new speculative development activity should enable Atlanta to accommodate large space users for the foreseeable future.”

Can Atlanta's industrial market maintain this upward momentum in 2015? CBRE's outlook for 2015's includes continued, strong performance with new product coming to market as both speculative investment properties and build-to-suit projects. Atlanta is expected to sustain its positive momentum from competitive rates and its desirable location as the hub of the Southeast.

One X factor could be the Internet. Brian Leary, president of Crescent Communities' tells GlobeSt.com the Internet has changed Atlanta industrial.

“Twenty years ago, industrial development was really more about business-to-business logistics,” he says. “With the explosion of high-speed Internet service in homes and the likes of Amazon, Zappos and eBay talking about same-day delivery, a good part of Atlanta's current industrial interest relates to the businesses associated with serving consumers.”