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Atlanta Is The Country's Hottest Industrial Market, And It's Getting Hotter

Maybe there is a reason for industrial developers to continue to be bullish on Atlanta even with another 10M SF of big-box warehouses under construction.

Warehouse, industrial, distribution center
The average height of warehouses and distribution centers has risen nine feet in the past 50 years.

“We're still seeing strong demand in Atlanta,” JLL Executive Vice President Chris Tomasulo said. "New requirements are popping up, literally, as early as this week."

JLL is tracking at least seven deals scouting the Atlanta industrial market, each in the range of 1M SF, including two retailers looking to enhance their e-commerce networks, Tomasulo said.

“We're just seeing a lot of activity on the retailer side,” he said.

Atlanta's industrial landlords have been humming on all cylinders since the start of 2017. By the middle of this year, tenants leased nearly 13M SF of warehousing space, propelling Atlanta as the leader in absorption for the nation, according to a Colliers International report.

“Given mid-year occupancy gains, and taking into account forecasted absorption, Atlanta is well on its way to record annual industrial absorption,” Colliers officials said in the report.

Some big names were among the tenants to open operations in the region, including Tory Burch, Variety Wholesalers, Mars, Duracell and Amazon. Other huge deals that occurred this past quarter include

  • Chocolatier Lindt & Sprüngli, which leased 1M SF at Lambert Farms Logistics Park with Panattoni, according to Colliers.
  • British fashion retailer ASOS, which inked a 1M SF deal to occupy a Majestic Realty Trust distribution center in Union City, adding 1,600 jobs to the area.
  • Chinese tire maker Sentury Tire just filed a development of regional impact with the Georgia Department of Community Affairs to develop a new 400-acre, $530M manufacturing and distribution center in LaGrange that also will be designated as its U.S. headquarters. The plant, off Pegasus Parkway, is expected to employ 1,000 people and be open by 2019, according to the filings.

And there is more on the horizon, with Lowe's Home Improvement eyeing an e-commerce distribution center south of Atlanta that could exceed 1M SF.

Atlanta Is The Country's Hottest Industrial Market, And It's Getting Hotter
Biggest warehouses in Atlanta under construction as of the second quarter

The activity has spurred developers to unleash at least another 10M SF of new industrial space into the market, including quite a few facilities geared toward e-commerce users, which typically need big blocks of warehouse space with high ceilings and plenty of trailer parking.

According to Colliers, a number of those distribution centers are already called for, including a Dollar General 1.2M SF build-to-suit on the city's south side and UPS' 1.2M SF small package facility next to Fulton County Airport-Charlie Brown Field.

“Availabilities for existing buildings over 500K SF have tightened dramatically. Only eight options are currently on the market,” Colliers officials said. “As demand remains strong, and forecasted deliveries manageable, Atlanta’s industrial vacancy rate could possibly dip below 7% by year’s end.”

Cushman & Wakefield Director James Phillpott said the single biggest driver for warehouse demand this year has been e-commerce as retailers — sometimes fronted by third-party logistic operators — expand their web of delivery hubs to feed consumers' growing hunger for online shopping.

“We've got absorption on track to cover development,” he said.

Core5 Lisa Ward
Core5 Industrial Partners Managing Director Lisa Ward

Atlanta-based Core5 Industrial Partners has been banking on tenants' continued demand for the region's warehouses. Most recently, the firm announced plans to break ground on a 1.1M SF logistics hub geared toward e-commerce users off Interstate 85, south of the city. The project will include ceilings reaching up to 40 feet high and parking that can accommodate more than 500 truck trailers.

Core5 has 7.5M SF of projects underway across the country, 4.5M SF of that in Atlanta alone, Core5 Managing Director Lisa Ward said. Of the development in Atlanta, a good portion of that space is already in lease negotiations with various tenants who may sign deals well before the space actually is ready to use, Ward said.

“Everything else that we have, we have more than one outstanding proposal,” Ward said. “I think we're very much still in balance. I feel very, very bullish.”

And Ward sees the demand primarily fueled by e-commerce needs among retailers. Given the revolution taking shape in the brick-and-mortar industry as more retail buying shifts online, there is little chance, short of a major geopolitical crisis perhaps, that demand for logistics space will soften, she said.

"They're just in the infancy implementing what it means to be an omnichannel retailer, which means we have significant runway,” she said.