Too Much Atlanta Industrial Spec?

ATLANTA—There's a massive amount of industrial commercial real estate coming online in Atlanta. Much of it is speculative building. Is it too much?

GlobeSt.com caught up with Sim Doughtie, president of King Industrial Realty/CORFAC International, in Atlanta, to check in on the current state of the construction market in part two of this exclusive interview. You can still read part one: Atlanta Industrial Hits Boom Status.

GlobeSt.com: We've heard there is a lot of new development and construction in the region. How much new industrial space is coming online?

Doughtie: Development and construction are absolutely booming. With over 7 million square feet of new construction recorded during the second quarter, we also set a record for new construction in a single quarter.

When looking at the four quarter total, we see over 18.8 million square feet of new construction—a level not seen since 1998. Of that mix, approximately 40% of the new product are build-to-suit facilities and 60% of the space is being built on spec.  Some of the projects that have been announced and are currently under construction in the Atlanta industrial market include:

• Fairburn Logistics Center: 1,129,750-square-foot spec turned build-to-suit for Google and Menlo Logistics;
• Union Station Business Center, a 987,840 square-foot spec building;
• King Mill Distribution Park, a 846,496 square-foot spec building;
• Prologis I-85 Jefferson Park, a 714,965-square-foot build-to-suit for Reckitt Benckiser;
• Gillem Logistics Center, a 700,000-square-foot build-to-suit for ES3, LLC; and
• Highland 75, a 574,000-square-foot build-to-suit for Surya

GlobeSt.com: What is driving all this activity and construction?

Doughtie: The overall economy is improving. The lending environment is much better and beginning to normalize.

Atlanta is a really big economy and has 13 of the Fortune 500 companies in the US, which is third behind New York (48) and Houston (13). By air, we are within two hours of 80% of the US population.

Regionally, we have been growing for decades. The 29-county Atlanta region is now home to an estimated 5,614,323 people according to the 2014 list of Metropolitan Statistical Areas—that's ninth in the US and a population that is larger than 24 states.

From 2000 to 2010, Atlanta was third overall in growth for the nation—behind Dallas and Houston in the same period. In addition to being the largest hub in the region with nearly 50 million people in the Southeast, excluding Texas, we consume a lot of goods and services and the providers of those goods and services need distribution and service center real estate to serve their customers. Our unemployment rate is reasonably low at 6.3% and the housing market is getting stronger.