Fifth Runway Construction Provides Hedge Against Surging Freight Cargo Vacancies

ATLANTA-How often does this happen? Business is slumping but there’s little prospect of a significant increase in vacancy rates.

It’s happening in the freight cargo industry on Atlanta’s Southside, near Hartsfield International Airport.

Cargo shippers who expanded their facilities at Hartsfield by an estimated one million sf in the past two years now face the prospect of tough times. Some of these companies may go belly up, but they won’t be leaving a large amount of distribution and shipping space vacant.

In fact, Harold Hagans, president of Atlanta Custom Brokers, tells GlobeSt.com that not only are there no significant vacancies, but many cargo handlers are looking for new space.

The reason? The fifth runway at Hartsfield. According to an estimate by EllisDaws Properties, 1.2 million sf of buildings could be demolished for the runway, which is slated for completion in 2005.

It’s an odd combination: Business is slowing dramatically–as much as 35%–but there’s no commensurate increase in vacancy rates.

“People are being rooted up along the south side of Sullivan Road,” Hagans says.

And they need to relocate. He points to new freight warehouses being built along Georgia 85 and I-75. He expects the development and relocation to continue. “We’ll see an awful lot of activity,” Hagans predicts.

According to Richard Bowers & Co.’s third quarter market report, there’s a 15.82% vacancy rate in the Airport/South Atlanta industrial submarket, with rents averaging $4.29 per sf. This compares to a metro-wide rate of 14.5% and rental rates averaging $5.32/sf.

In one recent deal, Highwoods Properties Inc. leased its 121,600 sf Tradeport Place IV to Evergreen Aviation Ground Logistics Enterprises Inc.

And earlier this year, EllisDaws Properties began developing AirLogistics Center @ Hartsfield, an industrial development consisting of three buildings containing 171,740 sf, 161,500 sf and 118,800 sf. Located on 39 acres, these facilities are specifically designed for airfreight providers and other distribution tenants that need close proximity to the airport.

While the boom in international airfreight may have ended, Hagans says business is still relatively good. He points out that ocean freight continued even when airfreight stopped in the wake of Sept. 11, and this is the industry’s busy season.

The real test will be how business is during the traditionally slow period between January and March, he says. Thanksgiving will be a good predictor, though.

“I really do think the travel holiday will be a big measurement on which way we are going,” Hagans tells GlobeSt.com.