Amazon leads Atlanta industrial market to 3rd largest quarter in history
- Atlanta’s industrial real estate market absorbed its third-highest quarterly amount of space ever in its history at 8.4 million square feet in Q3, 2020.
- Amazon alone accounted for just over 35% of total net absorption this quarter; most of this space was occupied in South Atlanta.
- The South Atlanta industrial submarket dominated, absorbing more space than all of Atlanta’s other industrial submarkets combined. Q3’s occupancy gains have pushed South Atlanta’s vacancy rate back below 10% for the first time since the end of last year.
- At 6.5%, the overall vacancy rate for Atlanta industrial is back to where it was at the end of 2019.
- Deliveries totaled just under 4.8 million square feet this quarter. At just over 1-million square feet each, Jefferson Logistics Center and Cross Roads Business Center were the largest buildings to come online.
- Despite tremendous occupancy gains, the average industrial lease rates per square foot (PSF) in Atlanta declined; even bulk rents were steady yet again this quarter.
It is smooth sailing through the end of the year for Atlanta industrial as the market shows no signs of slowing for some time.
Atlanta Industrial Market
The third quarter proved to be one of Atlanta’s most substantial periods of industrial absorption. A net total of 8.4 million square feet of space was occupied, the third-highest quarterly amount absorbed in the market’s history.
The largest e-commerce company in the world was a significant contributor to this feat. On the heels of its large transactions signed in the previous quarter, Amazon took occupancy of most of these warehouses in the third quarter, accounting for 35% of total net absorption in the Atlanta market.
South Atlanta benefitted the most from this as Q3 occupancy gains were more than all other submarkets combined. Most of the occupancy gains in South Atlanta took place in Airport/I-85 South. In addition to Amazon’s occupancies, new locations and expansions by Mondelez Global, Nouhas, Nestle Purina and Delta helped this area achieve its highest quarterly absorption ever.
For the first time in over a year, Atlanta’s industrial vacancy rate declined from the previous quarter. Absorption levels in Q3 outpaced the amount of industrial space delivered, contributing to the decrease in market vacancy.
Still, new inventory added to the Atlanta industrial market remained elevated at 4.8 million square feet. However, most notable as it relates to development activity is the record amount of industrial buildings currently under construction in Atlanta. At just under 27 million square feet, the market is at its highest level of construction activity ever. Overall, the Atlanta industrial market experienced its first average industrial lease rates PSF price decrease in eight years.
Atlanta Real Estate Market Forecast
Despite the pandemic, Atlanta industrial continues to fire on all cylinders. In some ways, COVID-19 has breathed new life into the markets aging expansion. The metrics show this: The third highest quarterly absorption in history, record construction activity, and continued leasing strength.
Though months now from Georgia having reopened its economy, e-commerce activity remains unwavering both locally and nationally and continues to be a significant contributor to industrial space demand in Atlanta. E-commerce related and logistics company occupancies accounted for over half of the space absorbed this quarter.
Because of the ongoing dynamics shaping consumer demand, companies have expanded their distribution channels more rapidly than previously intended. As a regional hub with no barriers to entry, Atlanta continues to benefit from this. Third-quarter industrial absorption, though dominated by one company, is proof.
Looking ahead, the forecast for the final quarter of the year shows another period of substantial occupancy gains, possibly leading to another year of 20 million square feet of space absorbed. There is some concern as to how long this momentum can continue, but for now, there appears to be no slowing the forces shaping Atlanta’s industrial market.