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ATLANTA-Industrial space leasing in the first quarter was off by 64%, or about 2.3 million sf, from the previous period but Colliers Cauble Co. assures its clients the market’s net absorption remained in the positive column with 1.3 million sf. A handful of large build-to-suit deals slowed the absorption rate which is expected regain its strength by the end of the second quarter.

“The industrial real estate community in Atlanta is now seeing an increase in the number of prospective tenants seeking 100,000 sf and greater,” says Colliers Cauble research director Scott Amoson. “Brokers continue to be active in the market, representing companies whose production levels are increasing, thus requiring them to seek space for new facilities and/or expansion of existing locations.”

For example, PetsMart is looking for a one-million-sf distribution hub in the Interstate-85 South corridor. Whirlpool seeks a little less than a million sf in the Interstate-75 area. And Gatorade has already picked Douglas Hill Business Center in Douglas County for its planned 913,000-sf warehouse facility.

“Demand levels are on the rise and that can be seen in the amount of deal volume taking place,” Amoson says. “Once completed, these deals, along with a number of smaller deals out in the market, will lead the growth for second quarter.”

Vacancy rates have remained level over the past three months with an overall vacancy level of 12.6% in a total industrial real estate inventory of 494 million sf. Flex space suffered the most ending the quarter with a negative absorption of 96,804 sf from its total 44.7-million-sf inventory. Flex space vacancies are at 17%.

Warehouse space accounted for 84% of the total 1.3 million sf of net absorption in the first quarter. Vacancies in the 337.6-million-sf warehouse segment are at 12%. The 111-million-sf shallow bay space category had positive absorption of 310,305 and a vacancy mark of 12.7%.

Rents remain stable. Flex space is going for an average $5 to $7 per sf. Shallow bay and distribution space is renting for $2.75 to $3.75 per sf. And warehouse space is coming in at $2.50 to $2.75 per sf.

New construction totals 7.7 million sf. Warehouse leads the way with 7.2 million sf of new product on the way. Shallow bay space will account for 441,324 sf. And new flex product will total 75,000 sf. “Given the strong demand for industrial space in Atlanta, construction levels are expected to increase over the year,” Amoson projects.

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