Deliveries Reached 8.7 MSF According to Cushman & Wakefield

Cushman & Wakefield released mid-year 2016 statistics for the Atlanta industrial market that show an impressive start to the first half of the year. The second quarter of 2016 continued the positive momentum Atlanta has been experiencing in the industrial market. Despite the record amount of deliveries, Atlanta is still ranked third in the nation behind Dallas and Chicago with 16.5 million square feet under construction. Occupancy gains remained strong this quarter with more than 3 million square feet of positive net absorption. Leasing activity is up 34% from last quarter to 5.3 million square feet in second quarter 2016. 

Mid-year 2016 statistics revealed that Atlanta has experienced the most industrial construction deliveries within the first half of any year ever recorded. Speculative completions so far this year are at 6.8 million square feet, while build-to-suit completions are at 1.9 million square feet. This brings the overall construction completion total to 8.7 million square feet, which indicates Atlanta is on pace to surpass the previous delivery record of 14.8 million square feet set in 2000. With 16.5 million square feet still under construction and over 13 million square feet expected to be completed by the end of 2016, Atlanta has a good chance of shattering the previous delivery record for the year. 

Overall net absorption for the first half of 2016 saw a slight, 3% increase from the first half of 2015. Second quarter 2016 industrial net absorption was 3.5 million square feet for a year-to-date total of 7 million square feet. Williams Sonoma occupied the 1 million-square-foot Braselton Commerce center this quarter, while Exel Logistics moved into over 980,000 square feet at the recently completed Union Station warehouse in the Airport/South Atlanta submarket. Second quarter 2016 marked the 12th consecutive quarter with at least 1 million square feet of positive net absorption. Lisa Pittman, Associate Director with Cushman & Wakefield’s industrial tenant advisory group, believes the positive trend will continue.

“In the last 12 months, Atlanta’s big box supply has barely outpaced the demand,” she said. “This coupled with the fact that the demand is mostly from users new to the market supports the levels of spec construction we are currently seeing. E-commerce continues to be a huge driver for the Atlanta industrial market – every major company with a high volume of online sales needs an Atlanta distribution center to reach the Southeast population. I believe we will continue to see this level of activity for the next 12 to 18 months.” 

Leasing activity increased to 5.3 million square feet in the second quarter from first quarter’s 4 million square feet, bringing the first half total to 9.3 million square feet. Wayfair signed the largest second-quarter lease for 840,000 square feet at the King Mill Distribution Park. Even though mid-year leasing activity dropped 31% from the first half of 2015, net occupancy gains remained strong. The overall vacancy rate increased 70 basis points year-over-year from 7.7% in second quarter 2015 to 8.4% in second quarter 2016. This increase in vacancy is due to the large amount of unoccupied inventory added within the first six months of the year. Overall triple-net asking rates increased slightly from a year ago from $4.20 per square foot to $4.22 per square foot in second quarter 2016. Looking forward, we expect speculative construction deliveries to relieve the tightening of space in Atlanta. Strong market fundamentals coupled with increasing demand for big-box space make Atlanta one of the top markets in the nation for industrial real estate. Current indicators suggest that 2016 industrial activity will remain active and consistent throughout the rest of the year.

2016 Mid-Year Industrial Highlights:

• Atlanta posted record construction deliveries with 8.7 million square feet of space delivered in the first half of 2016.

• Atlanta is ranked third in the nation behind Dallas and Chicago with 16.5 million square feet under construction.

• Leasing activity is up 34% from last quarter to 5.3 million square feet in second quarter 2016, bringing the first half total to 9.3 million square feet.

• Second quarter 2016 posted 3.5 million square feet of net absorption for a year-to-date total of 7 million square feet.

• This quarter marked the 12th consecutive quarter with at least one million square feet of positive net absorption.

• The overall vacancy rate increased 70 basis points year-over-year from 7.7% in second quarter 2015 to 8.4% in second quarter 2016 due to the unoccupied inventory added this year.

• Overall triple-net asking rates increased slightly from a year ago from $4.20 per square foot to $4.22 per square foot in second quarter 2016.

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