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ATLANTA-The metro area’s 495-million-sf industrial real estate market is in its second year of recovery with property prices and rents rising and vacancy improving, according to a new first-half market analysis by Marcus & Millichap Real Estate Investment Brokerage Co.

The area around Hartsfield-Jackson International Airport “continues to register some of the strongest price appreciation as institutional buyers compete for core assets,” says Brian W. Abernethy, Marcus & Millichap’s senior market analyst who prepared the report. The median price has increased to the mid-$40-per-sf-range and “prices are expected rise further as the year progresses,” he says.

Vacancy is improving “but remains relatively high” at 15%, the analyst says. “The decline is due to an increase in leasing activity and a limited amount of speculative construction,” Abernethy says. New construction in 2005 will total four million sf, 10% less than last year, he predicts. Most new construction will consist of warehouses sized from 250,000 sf to 500,000 sf in Atlanta’s northeast and south submarkets.

Net absorption is expected to total six million sf by year end, 70% greater than the 2004 total. “In spite of the increase, absorption will still be at one-half of the level recorded in 2000,” Abernethy notes. However, the analyst says “leasing activity in the market has picked up this year with a number of significant commitments.”

He cites Home Depot’s one-million-sf lease in the ProLogis Park Greenwood in suburban McDonough and PepsiCo’s plans to lease a one-million-sf distribution center nearby in Douglas County. That complex is being developed by a joint venture of Atlanta-based Seefried Properties and Catellus Co. Solo Cup and PetsMart are also planning to lease or build one-million-sf distribution centers.

“Atlanta’s industrial market will continue to post improvement, thanks to its role as a key distribution hub in the Southeast,” Abernethy concludes.

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