Atlanta Industrial Boom Continues to Accelerate
- Feb 16, 2018
Atlanta’s post-recession construction boom continued throughout 2017 and the metro’s industrial market set a new annual record for absorption, according to CBRE’s latest industrial and logistics quarterly report. Demand outpaced new deliveries in 2017, as numerous online and established retailers, suppliers and distributors have shown strong interest in the metro’s industrial product, pushing for an increase in pace and size of new industrial development.
The market’s inventory expanded with the addition of 18 million square feet of new space and experienced roughly 4 million square feet of net absorption over the course of last year, bringing the 2017 total to more than 21 million square feet. In addition, this marks the fourth consecutive year with more than 17 million square feet of absorbed space. As a direct result of strengthening absorption numbers, rental rates have also gone up—7.5 percent year-over-year and 27.6 percent overall since the end of 2014.
During the fourth quarter, nearly 2.5 million square feet of speculative space came online, with roughly 2.4 square feet of new product still available. The newly delivered spec space and the fact that more than 14.5 million square feet of industrial product is currently under construction are signs that supply is starting to alleviate some of the pent-up demand across the market. Additionally, more than 8 million square feet of space currently under development is spec warehouse.
Vacancy is likely to rise in the near future, as more than 7.5 million square feet of spec space is set to be delivered over the next quarters. The majority of the fourth quarter’s completions are in the Airport/South Atlanta submarket, due to the area’s proximity to the airport and Georgia ports. Given the prevalence of transportation and logistics firms operating within the state of Georgia, this is an unsurprising statistic.
The market’s competitive nature led to a $0.08 per square foot increase in overall rental rates, marking the 18th consecutive quarter of rent growth in Atlanta. The current rate of $4.58 per square foot is the highest in the last 16 years. The Airport/South Atlanta submarket experienced the most significant increase in overall rates during the quarter ($0.41 per square foot), closely followed by Central Atlanta ($0.37 per square foot). These changes correspond with a decrease in available inventory from 9.1 percent in the third quarter to the current rate of 8.9 percent.
The demand for bigger and more modern warehouses has become prevalent in large industrial distribution-oriented markets. On average across the U.S., warehouses built during the current cycle (since 2012) are 143 percent larger than they were during the previous expansion cycle between 2002-2007. The average warehouse in Atlanta has increased 284 percent since the last development cycle, from 94,500 square feet to more than 362,900 square feet today. The metro’s warehouse size has topped the nation, as Atlanta experienced the largest increase in average size among the top 30 industrial markets nationwide.
Charts courtesy of CBRE Research