4Q 2012 | Atlanta Industrial Market Report

Page 1

YEAR-END 2012 | INDUSTRIAL

ATLANTA

MARKET REPORT

Second Consecutive Year of Industrial Gains in Atlanta

Updated May 2012

MARKET INDICATORS Projected

Q4 2012

Q1 2013

VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE

CAP RATES

Following its best year since before the Great Recession, the Atlanta industrial market showed solid gains yet again in 2012, and enjoyed a second consecutive year with over 6 million square feet of existing vacancies filled. This year’s industrial absorption of 7.4 million square feet almost matched 2011, but fell slightly short. Still, two successive years of strong absorption defines the extent of Atlanta’s industrial market recovery. Activity in 2012 was the product of numerous factors, none more meaningful than strong demand from large consumer product companies, as well as the expansion of third-party logistics firms in the metro area and the growth of small businesses. In addition, the Atlanta area has begun to experience a manufacturing renaissance in the areas of bioscience/pharmaceuticals, automotive parts and heavy equipment thanks to expansions and announcements this year by Baxter Pharmaceuticals, Toyota Industries, Kubota Corporation and Caterpillar Inc. The impact these successes will have on the Atlanta industrial market is extensive. Some of the biggest move-ins and lease transactions of 2012 came from large consumer product companies. Home Depot, Carter’s and Owens Corning were the three largest industrial transactions of 2012; all three committing to over 1 million square feet. In the cases of Home Depot and Carter’s, these requirements originated from the companies’ growing e-commerce business and the need for each to better serve this segment of their business. The expansion of third-party logistics firms also contributed a significant amount of positive absorption to the industrial market. New Breed Logistics, HK Logistics, TranSouth Logistics and UTI Worldwide each expanded operations in the Atlanta area this year as supply chain optimization has become a modern requirement. Lastly, the growth of small businesses in Atlanta over the past couple of years has played a beneficial role to the overall health of the industrial market. Considered “bread and butter” transactions, these tenants, ranging between 20,000 to 80,000 square feet, have incrementally contributed to the increase in occupancy levels throughout the year. Many consider the return and growth of these types of transactions as a measure to local economic conditions. continued on page 2

UPDATE $4.00 $4.00

$3.75 $3.75

$3.50 $3.50

30,000,000

16%

25,000,000

14%

www.colliers.com/atlanta

6%

5,000,000

4% 2%

$2.50 $2.50

2012

2011

2010

2009

2008

2007

2006

(5,000,000)

2005

0 2004

2012 2012

Bulk Warehouse*

8%

10,000,000

2003

Market AVG

2011 2011

2010 2010

2009 2009

$2.75 $2.75

10%

15,000,000

Square Feet

$3.00 $3.00

12%

20,000,000

$3.25 $3.25

*Bulk warehouse defined as warehouse space in excess of 100,000 SF with dock loading and minimum ceiling heights of 24 ft.

ATLANTA INDUSTRIAL

NEW SUPPLY, ABSORPTION AND VACANCY RATES

Atlanta Rental Rates Overall Market & Bulk Warehouse* (per sq. ft.)

(10,000,000)

0% -2% -4%

Absorption

Deliveries

Vacancy %

Atlanta’s industrial market absorbed 7.4 million square feet in 2012. The overall industrial vacancy rate decreased yet again in the fourth quarter and is now at 12.4%. There were no fourth quarter industrial deliveries. Almost 1.4 million square feet delivered in 2012. Construction activity increased to almost 4.5 million square feet. Atlanta’s total industrial inventory now stands at 609 million sq. ft.


MARKET REPORT | YEAR-END 2012 | INDUSTRIAL | ATLANTA

DEFINITIONS Absorption (Net)-The net change in occupied space over a given period of time, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

Vacancy Rate-A percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Bulk Warehouse-A type of building designed to be used for bulk storage or materials, distribution or heavy manufacturing. Typically has a small amount of office space, ceiling heights of 24’ and bay depths of over 190’. Shallow-Bay Distribution-A type of building designed to be used for the distribution of materials or as a medium-sized manufacturing facility. Typically has 10%-30% of office, ceiling heights of 18’-24’ and bay depths of 120’-190’. Flex-A type of building designed to be versatile, which may be used in combination with office, R&D, quasi-retail sales and industrial warehouse and distribution uses. Typically has at least 50% office and ceiling heights under 18’.

Atlanta’s industrial market is poised to maintain its current course in 2013. Demand for industrial space remains elevated and continues to be driven primarily by manufacturing, third-party logistics and consumer product companies. With exception to a couple of speculative buildings under construction, new supply remains in check as well. Despite this, the Atlanta industrial market could see a slight uptick in vacancy at the beginning of the year due in part to the aforementioned spec industrial buildings coming online and also because of a slowdown of industrial leasing on the back end of 2012. Leasing activity dropped by approximately 35% in the latter half of the year due to uncertainty surrounding the economy. The effects of this slowdown will restrain absorption levels in the next couple of quarters. Going forward, the departure of some uncertainty will allow companies to focus their decision-making on new industrial requirements in the metro area. As higher absorption levels kick back in, overall vacancy should continue trending downwards. Another positive year of occupancy gains and increased leasing activity is expected for Atlanta’s industrial market in 2013.

VACANCY & AVAILABILITY

ABSORPTION & LEASING ACTIVITY

Atlanta’s industrial rate dropped for the sixth consecutive quarter, finishing the year at 12.4%. This a full 100 basis points down from year-end 2011.

Industrial absorption finished the year slightly below 2011. The total occupancy gain in 2012 was 7.4 million square feet.

The Northeast Atlanta industrial submarket saw the largest amount of vacant space filled this year; just over 4 million square feet

Northeast Atlanta accounted for 60% of this year’s absorption. The submarket’s largest move-ins were Carter’s and Bed, Bath & Beyond.

Industrial vacancy is expected to increase at the beginning of 2013 due to new deliveries and restrained leasing activity at the end of 2012.

Industrial absorption and leasing are expected to remain solid in 2013. The latter half of the year will be more robust than the first half as traction picks up on the largest requirements.

YEAR-END 2012 | Vacant Space By Type

YEAR-END 2012 | Net Absorption by Submarket

Shallow-Bay

Flex

(1,000,000)

CENTRAL ATLANTA

CHATTAHOOCHEE

STONE MOUNTAIN

NORTH CENTRAL

SNAPFINGER | I-20E

1,000,000

0

Warehouse

| COLLIERS INTERNATIONAL

2,000,000

SOUTH ATLANTA

FLEX 9,973,604 SF VCY RATE = 17.4%

Build-To-Suit-A term describing property that was developed specifically for a certain tenant to occupy. Can be either leased or owned by tenant.

P. 2

3,000,000

SHALLOW-BAY 9,864,641 SF VCY RATE = 12.9%

I-20W | FULTON IND

WAREHOUSE 55,689,978 SF VCY RATE = 11.7%

NORTHEAST ATLANTA

4,000,000

Square Feet

footage that is committed to and signed for under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity for buildings under construction or planned.

NORTHWEST ATLANTA

5,000,000

Leasing Activity-The volume of square


MARKET REPORT | YEAR-END 2012 | INDUSTRIAL | ATLANTA

UPDATE Largest Transactions (individual assets) in the Market for 2012 SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

335 Greenwood Pl.

South Atlanta Ind

10/11/2012

$48,400,000

1,248,346

$38.77

USAA Real Estate

195 King Mill Rd.

South Atlanta Ind

6/22/2012

$43,500,000

1,505,000

$28.90

The Blackstone Group

1090 Broadway

Northeast Atlanta Ind

8/8/2012

$42,500,000

807,990

$52.60

UBS Realty Investors

747 Douglas Hill Rd.

I-20 West/Fulton Ind

4/30/2012

$40,000,000

913,000

$43.81

LaSalle Investment Mgmt.

8095 McLarin Rd.

South Altanta Ind

10/11/2012

$38,150,000

1,044,288

$36.53

USAA Real Estate

Jackson 85 DC - Bldg. E

Northeast Atlanta Ind

8/16/2012

$30,825,000

1,004,400

$30.69

Hillwood Investment Prop.

Jackson 85 DC - Bldg. F

Northeast Atlanta Ind

8/10/2012

$29,750,000

772,000

$38.54

Exeter Property Group

490 Westridge Pkwy.

South Atlanta Ind

8/30/2012

$28,985,000

900,640

$32.18

Koch Industries

1655 Roberts Blvd.

Northwest Atlanta Ind

12/26/2012

$27,225,000

198,200

$137.36

H.N. & Frances Berger Found.

Hartman V - 7545 Hartman

I-20 West/Fulton Ind

6/27/2012

$26,350,000

569,673

$46.23

Duke Realty

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

ProLogis Park I-75

South Atlanta Ind

Home Depot

ProLogis

1,118,508

Build-To-Suit

625 Braselton Pkwy-Bldg A

Northeast Atlanta Ind

Carter’s

Duke Realty

1,061,663

Distribution Lease

8095 McLarin Rd.

South Atlanta Ind

Owens Corning

ProLogis

1,044,288

Warehouse Lease

Stanton Springs Ind Park

Snapfinger/I-20 East

Baxter Pharmaceutical

TPA Realty Services

1,000,000+

New Manufacturing Plant

493 Westridge Pkwy.

South Atlanta Ind

Georgia-Pacific

Panattoni

900,640

Build-To-Suit

Majestic Airport Ctr. II- #4

South Atlanta Ind

Del Monte

Majestic Realty

780,000

Warehouse Renewal

2530 Wayne Poultry Rd.

Northeast Atlanta Ind

Toyota Industries

Toyota

598,800

Manufacturing Plant Expansion

1340 Satellite Blvd.

Northeast Atlanta Ind

Mitsubishi

IDI

559,407

Build-To-Suit

3060 SouthPark Blvd.

South Atlanta Ind

Jacobson Warehouse

First Industrial

498,258

Warehouse Renewal & Expansion

7700 Spence Rd.

South Atlanta Ind

Toto Plumbing

MD Hodges

498,050

Warehouse Renewal

HISTORICAL LEASING ACTIVITY & AVERAGE CAP RATES

45,000,000

12%

40,000,000

10%

Square Feet

35,000,000

8%

30,000,000 25,000,000

6%

20,000,000

4%

15,000,000 10,000,000

2%

5,000,000

0%

Total Leasing Activity SF

P. 3

| COLLIERS INTERNATIONAL

AVG Cap Rate %

2012

2011

2010

2009

2008

2007

2006

2005

0


MARKET REPORT | YEAR-END 2012 | INDUSTRIAL | ATLANTA

UPDATE

Market Comparisons

VACANCY

BLDGS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY %

CENTRAL ATLANTA IND. Flex 95 36 Shallow-Bay Warehouse 255 Total 386

2,822,083 1,256,858 11,654,653 15,733,594

10.6% 8.5% 13.4% 12.5%

0.1% 0.0%

CHATTAHOOCHEE IND. Flex 111 27 Shallow-Bay Warehouse 359 Total 497

2,698,657 862,949 17,701,348 21,262,954

10.4% 2.3% 8.2% 8.2%

I-20 W / FULTON IND. Flex 98 Shallow-Bay 218 Warehouse 774 Total 1,090

3,063,527 12,773,329 74,917,904 90,754,760

NEW SUPPLY YTD SF

RENT

UNDER CONSTR SF

AVG RENT (NNN)

NET ABSORP CURR SF

NET ABSORP YTD SF

301,151 107,090 1,565,558 1,973,799

10.7% 8.5% 13.4% 12.5%

8.5% 8.5% 12.8% 11.7%

(62,500) (69,235) (131,735)

(28,003) (12,780) (384,310) (425,093)

-

-

-

$10.37 $2.33 $3.47 $4.40

0.3% 0.2%

279,849 20,000 1,504,693 1,804,542

10.4% 2.3% 8.5% 8.5%

10.9% 2.3% 8.5% 8.5%

13,646 (729) 12,917

(10,628) 92,870 (86,393) (4,151)

-

-

-

$7.86 $4.00 $4.20 $4.81

14.2% 12.0% 13.2% 13.0%

0.1% 0.3% 0.2%

434,248 1,540,601 10,078,031 12,052,880

14.2% 12.1% 13.5% 13.3%

15.4% 14.7% 13.6% 13.8%

37,791 335,411 92,198 465,400

-

-

NORTH CENTRAL ATLANTA IND. Flex 252 8,494,501 Shallow-Bay 116 4,686,153 Warehouse 399 15,223,109 Total 767 28,403,763

22.2% 10.3% 9.4% 13.4%

0.1% 0.0%

1,888,722 480,622 1,432,898 3,802,242

22.2% 10.3% 9.4% 13.4%

21.9% 10.4% 10.2% 13.7%

(27,302) 7,518 121,349 101,565

(33,810) (94,585) 179,921 51,526

-

-

NORTHEAST ATLANTA IND. Flex 646 18,704,570 Shallow-Bay 461 22,978,506 Warehouse 1,670 129,843,284 Total 2,777 171,526,360

20.4% 12.0% 10.0% 11.4%

0.7% 0.1% 0.2% 0.2%

3,947,282 2,797,995 13,186,561 19,931,838

21.1% 12.2% 10.2% 11.6%

21.1% 13.1% 10.6% 12.1%

(5,182) 223,409 617,328 835,555

(117,676) 335,583 4,190,271 4,408,178

-

NORTHWEST ATLANTA IND. Flex 306 9,954,243 214 9,206,110 Shallow-Bay Warehouse 820 42,687,794 Total 1,340 61,848,147

14.6% 12.7% 11.1% 11.9%

1.0% 0.1% 0.3%

1,556,558 1,172,383 4,775,101 7,504,042

15.6% 12.7% 11.2% 12.1%

14.4% 13.3% 11.1% 12.0%

(119,027) 52,538 (42,018) (108,507)

(190,326) 213,073 1,140,393 1,163,140

-

-

-

$8.40 $3.48 $3.90 $4.23

SNAPFINGER / I-20 EAST IND. Flex 119 2,950,345 103 4,702,223 Shallow-Bay Warehouse 436 37,018,207 Total 658 44,670,775

6.0% 9.2% 10.2% 9.8%

177,737 434,390 3,759,811 4,371,938

6.0% 9.2% 10.2% 9.8%

6.5% 9.3% 10.4% 10.0%

13,600 2,605 98,258 114,463

36,928 192,980 236,818 466,726

-

-

-

$7.16 $2.95 $3.03 $3.11

SOUTH ATLANTA IND. Flex 233 214 Shallow-Bay Warehouse 1,186 Total 1,633

5,375,457 13,316,216 129,033,830 147,725,503

11.2% 17.5% 12.4% 12.8%

0.1% 1.3% 1.2%

603,132 2,338,428 17,745,394 20,686,954

11.2% 17.6% 13.8% 14.0%

9.4% 19.1% 14.0% 14.3%

(97,692) 208,548 341,298 452,154

(161,826) 374,175 74,881 287,230

-

STONE MOUNTAIN IND. Flex 135 164 Shallow-Bay Warehouse 314 Total 613

3,415,553 6,910,645 16,361,494 26,687,692

22.4% 14.1% 10.0% 12.7%

0.6% 0.1%

784,925 973,132 1,641,931 3,399,988

23.0% 14.1% 10.0% 12.7%

23.8% 14.5% 10.0% 12.9%

29,248 30,780 (10,623) 49,405

(14,469) 2,606 44,835 32,972

-

ATLANTA MARKET GRAND TOTAL Flex 1,995 57,478,936 1,553 76,692,989 Shallow-Bay Warehouse 6,213 474,441,623 Total 9,761 608,613,548

16.9% 12.8% 11.3% 12.0%

0.5% 0.1% 0.5% 0.4%

9,973,604 9,864,641 55,689,978 75,528,223

17.4% 12.9% 11.7% 12.4%

17.0% 14.0% 12.0% 12.7%

(217,418) 860,809 1,147,826 1,791,217

(473,012) 1,352,099 6,521,746 7,400,833

-

0.4% 0.5% 0.5% 0.5% 0.5%

75,528,223 77,319,440 78,500,446 80,558,409 81,530,914

12.4% 12.7% 12.9% 13.3% 13.4%

12.7% 12.9% 13.3% 13.4% 13.7%

1,791,217 2,336,646 2,272,963 1,000,007 1,846,015

7,400,833 5,609,616 3,272,970 1,000,007 8,841,047

46,798 248,177 1,125,330 1,420,305

NEW SUPPLY CURR SF

U/C

VCY PRIOR %

-

TOTAL VCY SF

DELIVERIES

VCY CURR %

PROP TYPE

SUB VCY %

ABSORPTION

27,502 310,000 337,502

1,060,640 1,060,640

-

653,484 653,484

-

1,899,586 1,899,586

1,968,508 1,968,508

-

$6.05 $2.56 $2.88 $2.91

$9.48 $6.02 $4.50 $6.38

$6.31 $4.00 $3.26 $3.60

$8.65 $3.23 $2.77 $2.86

$4.94 $3.40 $3.17 $3.37

27,502 1,370,640 1,398,142

4,521,578 4,521,578

$7.40 $3.47 $3.11 $3.40

1,398,142 1,398,142 242,502 27,502 2,216,998

4,521,578 3,792,925 2,368,531 1,930,047 242,502

$3.40 $3.39 $3.45 $3.44 $3.51

QUARTERLY COMPARISONS AND TOTALS

QUARTERLY COMPARISON AND TOTALS Q4-12 9,761 608,613,548 Q3-12 9,761 608,613,548 Q2-12 9,758 607,457,908 Q1-12 9,757 607,242,908 Q4-11 9,756 607,215,406

12.0% 12.2% 12.5% 12.8% 13.0%

NOTE: STATISTICAL SET INCLUDES ALL INDUSTRIAL PROPERTIES 10,000 SF AND UP, EXCLUDING HEAVY MANUFACTURING PROPERTIES. WHILE COSTAR ATTEMPTS TO PROVIDE THE MOST ACCURATE DATA AT THE END OF EVERY QUARTER, REVISIONS ARE MADE THROUGHOUT THE YEAR ACCOUNTING FOR DISCREPANCIES IN PAST REPORTING.

1,155,640 215,000 27,502 114,769

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 4


MARKET REPORT | YEAR-END 2012 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES

Around 1.4 million square feet of industrial space delivered in 2012. The largest addition was Georgia-Pacific’s 900,640 SF build-to-suit in South Atlanta.

Construction levels are expected to increase in 2013 with build-to-suits remaining the projects of choice. There are, however, a handful of developers looking to take advantage of the positive market activity and move forward on spec construction projects.

Average rental rates held steady from last quarter at $3.40/sf NNN. This rate is down $0.11/sf from the end of 2011.

The trend going forward shows rental rates firming up, yet still remaining a tenant’s market.

522 offices in 61 countries on 6 continents United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118

INVESTMENT & SALES ACTIVITY Industrial investment activity in 2012 was the strongest it has been in five years. Around $943 million in sales volume took place.

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

$1.8 billion in annual revenue

• Over 2.5 billion square feet under

SUBMARKET

SIZE (SF)

DELIVERY DATE

management • Over 12,000 professionals

Home Depot BTS - ProLogis Park 75

South Atlanta Ind

1,118,508

Second Quarter 2013

600 Riverside Pkwy.

I-20 West/Fulton Ind

653,484

First Quarter 2013

Toyota - 2530 Wayne Poultry Rd.

Northeast Atlanta Ind

598,800

Second Quarter 2013

UNITED STATES: Atlanta Caldwell Zimmerman Executive VP | Colliers Manager Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 888 9000 FAX +1 404 870 2845

Mitsubishi BTS - 1340 Satellite Blvd.

Northeast Atlanta Ind

559,407

First Quarter 2013

Kubota - 1001 McClure Industrial

Northeast Atlanta Ind

500,000

Third Quarter 2013

7300 Oakley Industrial Blvd.-A100

South Atlanta Ind

353,400

Second Quarter 2013

PPG BTS - 7795 A Spence Rd.

South Atlanta Ind

285,600

First Quarter 2013

Kuehne + Nagel - Camp Creek BP

South Atlanta Ind

211,000

Second Quarter 2013

874 Thomas Pkwy.

Northeast Atlanta Ind

141,289

First Quarter 2013

Canton GAINESVILLE Cumming

CHEROKEE CO. F FULTON CO. F FORSYTH CO.

Allatona Lake

son

Lake Lanier

Woodstock

FO RS FU

Mountain Park

CHEROKEE CO.

Acworth

H YT O LT

OW CO.

N

Alpharetta

CO . CO .

Brase

NORTHEAST ATLANTA

e hooch e tac

Cha t

PAULDING CO. COBB CO.

NORTHWEST ATLANTA

INDUSTRIAL SUBMARKETS

Buford

HA GW INN LL CO . ETT CO .

Sugar Hill

NORTH CENTRAL ATLANTA

Rive r

BARTOW CO. CHEROKEE CO.

ersville

Roswell

Duluth

316 CO BB FU LT CO O . N CO .

MARIETTA

Lawrenceville DORAVILLE Norcross

CHAMBLEE SMYRNA

DECATUR Avondale Estates

oo

SNAPFINGER I-20 EAST

att

h ac

ATLANTA

e

CO .

r

R iv

ch e

glasville

Ch

EAST POINT COLLEGE PARK HAPEVILLE

DEKALB HENRY

Hartsfield-Jackson International Airport

CLAYTON CO.

Union City Fairburn

FULTON CO. COWETA CO.

Palmetto

. ON CO FULT CO. TTE FAYE

675

CO. CO.

W AL TO N

CO .

Lithonia

Conyers Covington RO C NE KDA WT LE ON CO CO . .

I-20 WEST / FULTON INDUSTRIAL

Snellville

STONE MOUNTAIN Stone Clarkston INDUSTRIAL Mountain

DE KALB RO CO CK . DA LE CO .

COBB CO. DOUGLAS CO.

GW IN DE NE KA TT LB C CO O. .

CENTRAL ATLANTA

G W IN NE TT

CHATTAHOOCHEE INDUSTRIAL

Austell

e

PAULDING CO.

DEKALB CO. FULTON CO.

Powder Springs

FOREST PARK Riverdale

Stockbridge

SOUTH ATLANTA Jonesboro

McDonough

nan

BU TT S

CO .

HENRY CO. CLAYTON CO.

Fayetteville

The Atlanta industrial market consists of nine submarkets. They include Central Atlanta, Chattahoochee Industrial, I-20 West/Fulton Industrial, North Central Atlanta, Northeast Atlanta, Northwest Atlanta, Snapfinger/I-20 East, South Atlanta and Stone Mountain Industrial. The major interstates in the region include: I-75, I-85, I-285, I-575, I-985, I-675 and I-20. Georgia 400 and US 316 also play important roles to Atlanta’s transportation system.

RESEARCHER: Atlanta Scott Amoson Vice President | Director of Research Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 877 9286 FAX +1 404 870 2845 This market report is a research document of Colliers International. Information herein has been deemed reliable and no representation is made as to the accuracy thereof. Colliers International-Atlanta, Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 520 offices throughout 62 countries worldwide.

Accelerating success.

www.colliers.com/atlanta


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