Atlanta Industrial Fundamentals Again Smash Records
Metro Atlanta's industrial absorption reached an all-time high in the third quarter.
Tenants moved into 5.8M SF more warehouse and distribution space than they vacated between July and September, according to a report by CBRE. That puts the total positive absorption for the year so far at 22.7M SF, “more than any other year on record,” CBRE Senior Research Data Analyst Tashieka Moore wrote in the report.
The largest deal of the quarter was with CJ Logistics' 1M SF lease at the Locust Grove Distribution Center in Henry County, south of Hartsfield-Jackson Atlanta International Airport, according to CBRE. That was followed by Goodman Manufacturing, which leased 750K SF at Jefferson Mill Business Park, a 233-acre industrial park in Jackson County, 60 miles north of Downtown Atlanta.
Other big third-quarter leases include Mobis Parts America, which signed 447K SF, also at Jefferson Mill, Expeditors International with 365,500 SF at the Clayton Commerce Center II and Kane Logistics' 339K SF lease at 4795 Coates Drive, both in South Atlanta.
“The fundamentals of the market have never been better,” Ward wrote in an email.
Leasing activity in Metro Atlanta also broke records, King Industrial Realty President Sim Doughtie said. In the third quarter, tenants leased 24.6M SF, breaking the previous metro record by 4.1M SF. Tenants have leased a total of 65.2M SF throughout the metro area in 2021 so far, according to data compiled by King Industrial.
“Comparing absorption, activity and new construction to our previous history in Atlanta, we set all-time records in each category,” Doughtie told Bisnow in an email.
Over the past seven years, developers have built 170M SF of new distribution space in Metro Atlanta, Doughtie said.
“And we absorbed it, because the availability rate decreased from 15.2% down to 10.8% during that same time period,” he said.
As of the third quarter, developers were constructing 34.5M SF of new warehouse space in Metro Atlanta, 40% of which is pre-leased, according to CBRE.
Ward said a confluence of three trends is pushing companies to lease more warehouse space in Metro Atlanta: the continued growth of online shopping, which is feeding e-commerce demand; companies leasing warehouse space to store extra goods in anticipation of delivery delays; and some companies now bringing limited manufacturing back to the U.S.
Despite the boom in activity, Doughtie said he remained concerned that a labor crunch at the ports and in the trucking industry could slow down activity.
“There are not enough dockworkers and then there are not enough truck drivers to deliver the containers to the warehouses,” he said.
Ward said escalating prices of construction materials could also crimp industrial's growth in the not-too-distant future.
“What keeps me up at night is the true volatility — both magnitude and speed of change — for construction materials along with delivery timelines,” Ward said.
While construction costs moderated some after a 2020 midyear peak, they spiked again in the second quarter of this year, according to the Turner Building Cost Index, spurred by an increase in demand for construction and supply chain delays for materials such as lumber, steel, copper and PVC piping.
“We are at unprecedented levels now, and we really don't see any relief on the horizon,” Ward said.