SOUTHEAST SNAPSHOT, JANUARY 2012

Atlanta Industrial Market

With low rental rates and available square footage, Atlanta’s industrial market remains a favorable environment for tenants and buyers interested in discounted real estate. Many are taking the opportunity to renegotiate leases on existing space or upgrade in terms of size, quality and location.

With its close proximity to Hartsfield-Jackson Atlanta International Airport, CoStar Property reports South Atlanta’s Industrial Submarket is leading the metro area, with net absorption year-to-date in the third quarter of 2011 of 4.46 million square feet at an average quoted rental rate of $3.05 per square foot. The Northeast Atlanta submarket followed by posting year-to-date net absorption of 1.12 million square feet in the third quarter of 2011 at a higher quoted rental rates averaging $4.60 per square foot. Total year-to-date net absorption in the third quarter of 2011 for the metro area was 5.53 million square feet, with average quoted rental rates of $3.83 per square foot. This is in spite of the fact that flex space experienced negative net absorption, which accounts for approximately 10 percent of industrial inventory.

The third quarter 2011 average vacancy rate of 13.3 percent has dropped relative to previous periods due in part to positive absorption and anemic new deliveries to the market. Notable transactions this quarter include Georgia Pacific’s 429,6000-square-foot block leased in Liberty Distribution Center III, and Cargo Services of Atlanta’s 215,300-square-foot lease renewal in Southfield Logistics Center. Taking advantage of the favorable investment market, Welsh Property Trust purchased both 8 Mount Moriah Road for $37.45 million ($52.28 per square foot) and Hartman III & IV for $27.5 million ($43.01 per square foot). Additionally, Lincoln Property Company acquired Horizon Creek Distribution Center in Suwanee for $29 million ($60.05 per square foot).

Looking forward, the health of our broader economy hinges primarily on job creation, increased consumer spending, and national/international debt reduction efforts. Until recovery is fully underway, companies participating as tenants and buyers in Atlanta’s industrial market will continue to enjoy discounted real estate.

— Kelly Pensmith is the marketing/PR director and Ryan Harchar is the director of research, both with Atlanta-based Richard Bowers & Company/TCN Worldwide.

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