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Overall, the Atlanta real estate market has continued to improve. Low interest rates have helped stabilize assets and attract new business, with manufacturing leading the way.
At the end of first quarter 2012, CoStar Group reported the overall Atlanta industrial vacancy rate was 15.5 percent. For the same period ending in 2013, CoStar reported the vacancy had fallen to 12.7 percent. Those numbers have not come easy and are a true testament to the quality of Atlanta’s real estate brokers, landlords and owners who have shown a creative ability to solve problems and make deals.
The past 12 months have been filled with exciting new project announcements, including build-to-suits. Among the companies that have announced construction projects include Baxter Healthcare, Porsche, PPG, Caterpillar, Hill Phoenix and Mitsubishi. Additionally, companies such as US Lumber, Subaru, American Building Supply, Atlanta Bonded, Carters and Decoster have recently expanded, filling existing vacancies in the market. While the list is impressive, we need more expansion from the existing industry.
According to the U.S. Census Bureau, the population in Atlanta’s MSA was 5.4 million in 2012, which included 1.9 million households. STDB Online data service projects that the Atlanta MSA population will increase at an average rate of 1.95 percent annually over the next five years. In February, the labor bureau reported that metro Atlanta’s unemployment rate was at 8.3 percent. This is down from a high of 10.8 percent in 2010, and down from the recent 8.4 percent reported at the end of 2012.
The housing market has stabilized and is now growing. New construction statistics are up from the past four years. The construction supply sector is in growth mode with US Lumber taking 220,000 square feet at Highstreet’s Gwinnett Regional Distribution Center, leased by Seefried Properties. “The rail, outside storage and good access to metro Atlanta attracted the user,” says Doug Smith, senior vice president at Seefried Properties. “The local bread-and-butter deals are coming back slowly, but the market is certainly more active than it was a year ago.” To further this trend, American Building Supply increased its footprint to 430,000 square feet at Majestic’s Airport Center 2 building.
The near extinction of speculative construction has helped to hold down Atlanta’s vacancy rate. In the last four years, only IDI has stepped up with its Riverside Business Center. Lisa Ward, vice president of leasing at IDI’s Atlanta office, says she is seeing good activity from distribution users as the 653,484-square-foot, cross-dock facility nears completion. “Atlanta continues to be a targeted city of data center requirements, due to the low cost of power ($0.05-$0.07 per kilowatt hour, compared to some parts of the U.S. where the rate is $0.18 per kilowatt hour-plus), we offer good fiber connectivity, access to technical talent (Georgia Tech) for labor, low real estate costs and a low risk of natural disasters,” says Ward. “There continues to be significant growth in data centers due to the proliferation of cloud computing, in which software, for example, is accessed via the Internet versus having it on your machine.”
Atlanta’s west side, known as I-20 Atlanta’s west submarket, has continued to grow. DCT recently announced plans to construct a 750,000-square-foot building, and started grading in April 2013. Local developer, Rooker, has gained a strong land position in the corridor as well, and while no paper for construction has been filed to date, they are well positioned to build more than 2.5 million square feet of total development within Riverside West Business Park. Rooker is currently working on site improvements and development while chasing tenants for a lead building.
Food manufactures and distributors have continued to scout the Southeast for operation locations. Most notably, Kraft sold a 735,233-square-foot property on Best Friend Road in Norcross, Ga., to Eagle Rock Distribution (a local Anheuser Busch distributor) for $16.5 million in December. Eagle Rock continues to expand its operations, and while they will take advantage of the existing cooler space in the building, they will also build an additional office complex on site.
Buckhead Beef, owned by Sysco, sold its processing and cooler facility on Marietta Boulevard for $1.95 million. Renaissance Organics will soon occupy the property. Martin Brower recently completed a 212,000-square-foot build-to-suit project at McDonald Development’s Southmeadow Business Park, located off Camp Creek and I-285. “The highway access, CSX rail service and proximity to the metropolitan area all made the site viable for Martin Brower,” says John Downing, vice president of marketing with McDonald.
Duke Realty has a strong land position at the interchange of Camp Creek and I-285 as well. The company can still build another 2 million square feet at Camp Creek Distribution Center. According to Wes Hardy, vice president of leasing in Duke’s Atlanta office, “We’ve seen food users and manufacturers from around the country. I think they are attracted to our pad-ready sites.”
Atlanta’s industrial sector is experiencing an increase in activity, whether its construction supply, data centers, food users, or just “good ole bread and butter” deals. The combination of Atlanta’s intermodal access, port access, international airport, skilled labor, affordable housing and the state’s low 6 percent corporate income tax rate, will continue to attract new business and create job growth.
— Chip Watson, SIOR, Principal at Avison Young's Atlanta office