Smaller Tenants Ruling Atlanta's Industrial Market

For Atlanta industrial landlords, it's been good to be shallow.

Shallow-bay and small industrial properties in the metro area have been performing better than their larger brethren over the past year. Warehouse spaces that range from 20K to 50K SF had a 5.6% vacancy rate at the end of the second quarter compared to the overall industrial market, which sits at 9.2%, according to Avison Young.

Part of the reason why, industry sources say, is the types of tenants who tend to take smaller industrial spaces — mom-and-pop and service businesses and small manufacturers — have been largely immune to the impacts of President Donald Trump’s trade wars and tariffs.

“Statistically, we’ve seen those spaces are much more resilient,” Avison Young Senior Vice President Jason Holland said. “They’re much more immune to the tariff situation than your big bomber 500K SF [building].”

More than half of the nearly 10M SF of leases signed in the first six months of this year were for spaces 50K SF or smaller, according to Avison Young.

Small warehouse spaces also command higher rents. Average asking rent for spaces 50K SF or smaller is $11.42 per SF versus $9.86 per SF for the overall market, according to Partners Real Estate data. 

“Smaller spaces lease up quicker than bigger spaces,” Bull Realty Vice President Shoumic Khan said. “There are more smaller companies looking for space.” 

Owners of the small warehouses tend to be more flexible and offer shorter-term leases, Khan said. Owners of giant distribution centers that span hundreds of thousands of square feet more commonly require tenants to commit to a decade or more.

That dynamic is driven partly by smaller warehouse users typically not having superior credit, making landlords hesitant to grant them long-term leases. The owners also have less debt in the properties, giving them financial wiggle room to offer flexible terms, Lee & Associates associate Elizabeth Kennedy said. 

The shorter-term leases create a regular churn of activity within the small industrial sector. But that’s not exactly a bad thing for landlords, Khan said. 

“The fact that there are so many tenants looking for this space, high turnover is a good thing,” Khan said. “Every time there’s turnover, [landlords] can go ahead and raise rents.”

Landlords of small industrial properties pushed rates up 32% over the past five years, according to Partners Real Estate.

The short-term nature of small warehouse leases also appeals to many tenants around the Atlanta Hartsfield-Jackson International Airport warehouse market. Kennedy said many of the businesses she works with are tied to the airport and its operations and operate on contracts that don’t last longer than three years, she said.

She recently worked on a three-year lease with Knight Construction for 4K SF near the airport after the company secured another contract with Hartsfield for construction work.

“Especially in the airport market, it really has to do with their airport contracts,” she said.

The Atlanta industrial market overall has had a slow start to 2025. Tenants emptied out more than 2.3M SF of industrial in the second quarter, a year after absorbing nearly 4M SF, according to Partners.

But with more clarity around Trump’s tariff policies taking shape, players in the market said tenant interest is on the rise — but the size of their requirements isn't.

“Most of the activity we’re seeing is at least under 150K SF,” Holland said. “Over the past 60 to 90 days, there seems to be a brisk pickup in tour activity.”