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Atlanta's Big-Box Industrial Leasing Slowing Down In 2018

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If you are a tenant needing a million sprawling square feet of warehouse space, Seefried Properties has a building for you in Jackson County.

The problem is there are fewer tenants out scouring the Atlanta industrial market for big blocks of space than in months past, Seefried Senior Vice President Doug Smith said — at least as Atlanta's real estate market wallows in the sleepy dog days of summer.

Seefried Properties
Seefried Properties' Valentine 85 Distribution Center in Jackson County, which recently delivered on a speculative basis

“We got 1M SF in Jackson County, and I wish we had more activity on it,” Smith said. “But I'm not concerned. I think it's a temporary breather.”

Industrial landlords continue to see a torrid pace of leasing activity in Atlanta this year, but it may be hard to match the activity of 2017, which made the history books with more than 20M SF absorbed. Through the first half of 2018, companies leased nearly 6M SF, according to CBRE data.

While healthy, that number actually represents more than a 7M SF decline from the first half of last year.

Perhaps more telling is the sheer activity taking place in Metro Atlanta. The last four quarters saw more than 50M SF of deals inked in the market, which marks the 18th consecutive quarter of deals — both leasing and sales — above 50M SF, King Industrial Realty President Sim Doughtie said.

Some of the bigger companies to strike leases this year so far include: ASOS with 1M SF in Union City; Vert Logistics occupying 760K SF near Hartsfield-Jackson Atlanta International Airport; Sunbelt Marketing taking 560K SF in Fulton Industrial; and S&S Activewear inking 500K SF in the South Atlanta submarket, according to CBRE.

Retailer Five Below is in the process of buying a 700K SF distribution facility just south of Atlanta, CEO Joel Anderson told stock analysts on an earnings call last month. It is a facility that can grow up to 1M SF as needed, Anderson said.

“We expect this [distribution center] to become operational in the spring of 2019. This is the first facility built entirely to our specifications and owning the building will provide us with the control and flexibility as we grow our footprint throughout the Southeast,” he said.

As Bisnow previously reported, a bulk of the 2018 activity has focused on submarkets on the southside of the metro area, where land can accommodate sprawling warehouses and is close enough to both the nexus of the city's population and the airport.

“The market continues to be strong. There are a lot of deals circling the marketplace,” Doughtie said.

But there may be a divergence in the making when it comes to tenant activity in Atlanta's industrial landscape. While tenants seeking 300K SF or less are still plentiful, there are fewer big-box deals floating around the market, Smith said.

Seefried PRoperties
Seefried Properties Senior Vice President Doug Smith

“Atlanta has always got its little pockets of slowdown,” especially in the summer months, Smith said. “There's nothing wrong with the economy to tell me there's a [permanent] slowdown.”

According to Colliers International, some 14M SF of deals have potential to land in the Atlanta market, including Project Bobcat, a mystery tenant eyeing at least 750K SF of distribution space and Project Rocket, a more than 2M SF deal that is reported to be Amazon.

CBRE Vice Chairman Tony Kepano said this may simply be a lull in activity because many companies are evaluating warehouse and distribution center designs with plans to hit the market with new leasing requirements in the near future. Larger warehouses are becoming more complicated in their layouts, which requires longer planning periods for companies to get them right, Kepano said.

“Everyone's very focused on delivery times, efficiencies, ensuring right products and right locations,” he said. “All across the board, they're looking at tightening up their supply chains. It's not just e-commerce.”

CORRECTION: JULY 13, 1 P.M. ET: A previous version of the story incorrectly reported the span of time 50M SF of activity occurred in Atlanta. The story has been updated.