Stronger than expected absorption in Q4 helped push the Atlanta industrial market to yet another robust year.
- Continuing a string of solid annual gains, the Atlanta industrial market absorbed 15.9 million square feet of space in 2019.
- Yet again, South Atlanta dominated the year, leading the market with 6.8 million square feet of positive space absorption. Also, Northeast Atlanta posted its strongest year since 2017 thanks to occupancy gains in the Jackson County area of the submarket.
- The overall industrial vacancy rate increased for the first time in three years; though this was anticipated. Despite the strong absorption, new deliveries outpaced demand as Atlanta's inventory grew by 21.5 million square feet this year.
- Construction activity remains above the 20 million square-foot market for the seventh consecutive quarter. The majority of product currently in development is in the 300k-500k square-foot range.
- With the overall average increasing 4.3% from 2018, industrial rents are up for a seventh straight year. Bulk rents are up as well; however, the average is beginning to idle.
- Solid demand fundamentals should procure yet another strong year of activity in Atlanta's industrial market in 2020.
Atlanta Industrial Market
Stronger than expected absorption in Q4 helped push the Atlanta industrial market to yet another robust year. Net industrial absorption totaled 15.9 million square feet in 2019, moderately higher than the anticipated total between 13-14 million square feet.
The year was filled with numerous occupancies and expansions, though industrial tenants between 300k-500k square feet dominated the landscape. Combined, tenants of this size accounted for a third of the occupancy gains in the year.
Additional, leasing activity was highest from companies seeking 500k square feet or less over the past twelve months. There were also a few large, notable move-ins to occur. GE Appliance's occupancy of its 1.1 million square-foot distribution center in the Northeast Atlanta submarket was the largest, and the only occupancy above 1-million square feet in the year; a stark contrast to lat year's activity.
In stark contrast to last year where activity over 1-million square-feet was at record levels, 2019 will be noted for the smaller industrial tenant which provided much of the positive activity throughout the year. Looking closer at the data, companies moving into 200k-500k square feet account for 45% of total net industrial absorption during the past twelve months.
Likewise, the majority of leasing activity in the year feel into this space category. While demand continues to signify an expansionary environment, it is not enough to keep up with the onslaught of new vacancy added from large industrial projects.
2019 saw the most industrial space delivered since 2016. Over 65% of this space remains available for lease. Looking ahead to 2020, another 17 million square feet of new inventory is expected, only 16% of which is leased or in build-to-suit projects.
It is likely supply will outpace demand yet again in the coming year leading to more vacant space added; however, the Atlanta market is still expected to see solid occupancy gains in 2020.