Q2 2012 Atlanta, Georgia Industrial Submarket Trends

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Q2 2012 Atlanta, Georgia Industrial Submarket Trends

South

  • Development in the South Atlanta area, which includes Hartsfield Airport and areas of Clayton, Henry, and south Fulton counties, expanded rapidly for a number of years prior to the recession. The low cost of land, occupancy, and labor have proven advantageous.
  • As described below, the South Atlanta submarket is the site of two of region’s most prominent recent build-to-suits.
  • Spec. According to JLL’s second quarter report on the market, as noted previously, “At least one speculative building is likely to break ground” in this submarket this year.
  • “Big boxes near the airport” appear to be among “the most stable” industrial properties metrowide notes this source.
  • Warehouse/distribution. With 85.7 million square feet of warehouse/distribution space as counted by Reis, South Atlanta hosts the largest volume of existing inventory of this type metrowide.
  • In 2011 net absorption was recorded at 1.1 million square feet alongside a roughly equivalent volume of new supply.
  • First half 2012 followed with net absorption at 1.7 million square feet with no new supply delivered. The second quarter absorption total alone was 1.5 million.
  • While declining, vacancy remains high. Reis put the second quarter warehouse/distribution rate at 20.1%, down 170 basis points for the quarter, down 200 year over year.
  • At $2.93 psf and $2.51 psf, second quarter’s low average asking and effective rents were up 1.4% and 2.0% for the quarter and were up 1.4% and 1.2% year to date.
  • Last year’s largest completion metrowide was the 1.1-million-square-foot Clorox Distribution Center build-to-suit, which completed construction at South Creek industrial park in Fairburn that February.
  • More. The move entailed Clorox’s evacuation of space occupied since 2004 at Duke Realty’s Camp Creek Business Park, also in the South Atlanta submarket.
  • SANY America’s 420,000-square-foot assembly plant completed in February 2011 at 318 Cooper Circle, Atlanta.
  • Under construction. Georgia Pacific’s $20 million, 60-acre, 900,600- square-foot build-to-suit distribution center is underway for completion in October on Westridge Parkway in McDonough (Henry County). Panattoni Development Company is the developer.
  • A May 2013 completion date is planned for the 211,000-square-foot Kuehne-Nagel southeast headquarters building at Duke Realty’s Camp Creek development. Construction had not begun per the end of July.
  • Planning totals and long-term expectations are high. Reis reports 13.0 million square feet of warehouse/distribution space in the planning-proposal pipeline in numerous projects, nearly all of which are located in five business parks.
  • The largest total, for 20 proposed buildings with a combined total of 4.6 million square feet, belongs to Coweta Industrial Park in far southwest suburban Newnan. Pattillo Construction is the developer.
  • In Fairburn 2.8 million square feet of warehouse/distribution space have reached the planning phase in six buildings in Saben LLC’s Shugart Farms Lake Park.

Greenwood Industrial Park from AMB Property Corporation and King Mill

  • Distribution Park, both in McDonough (Henry County), follow with 2.6 million square feet (five proposed buildings) and 2.2 million square feet (four planned buildings).
  • More. A 969,150-square-foot distribution center for Kraft Foods completed in the King Mill Distribution Park in late 2010.
  • Searching. Restoration Hardware “has narrowed its search for 1.0 million square feet to the Airport/South I-85 submarket and Savannah,” reports JLL.
  • UPS is looking for 400,000 square feet along I-85 South and I-20 West (JLL).
  • Lowe’s Companies Inc. occupied its new 1.3-million-square-foot warehouse in Palmetto in November 2011, Atlanta Business Chronicle reported at the time.
  • Forest City Enterprises Inc., Cousins Properties Inc. and The Integral Group have been selected as master developer for the 104-acre first phase of the 448-acre Fort
  • McPherson Research Park redevelopment project, the Chronicle reported in March 2012.
  • Sale. Denver-based Amstar and Huntington Industrial Partners have announced their acquisition of the 187,134-square-foot occupied, single-tenant 3760 Southside Industrial Parkway bulk industrial building, PRWeb reported in July. The building is 100% leased to Pratt Corrugated Holdings.
  • Musical chairs. JLL reports a 301,152-square-foot second quarter lease by Mobis Parts America at 1200 Oakley Industrial Boulevard (Southcreek Distribution Center I), thus “backfilling all but 100,000 square feet of the Owens Corning space.”
  • And . . . As reported previously, Owens Corning leased 1.04 million square feet from Prologis at 8095 McLarin Road near the CSX intermodal yard in the Fairburn-Palmetto area, filling space formerly occupied by Unilever.
  • New Breed Logistics leased 243,000 square feet at 7300 Oakley Industrial Boulevard during the quarter.
  • Sale. The 375,700-square-foot 7320 Oakley Industrial Boulevard distribution building sold in May for $12.875 million ($34 psf), Reis reports. Exeter 7320 Oakley Industrial LLC and Exel Logistics were the respective buyer and seller.
  • Flex/R&D. Total first half 2012 net absorption in the small 3.8- million-square-foot South Atlanta Flex/R&D market was positive 28,000 square feet, all of which occurred during second quarter. The total for all of 2011 was 74,000 square feet.
  • Second quarter vacancy and mean asking rent were 16.9%, down 80 basis points since year-end, and $4.94 psf, up a penny.

Northeast

  • Attracted by available, affordable land, the development pattern of recent years has featured expansion from closer-in areas, including areas of Gwinnett County, into the farther reaches of the northeast.
  • Thus, substantial activity has spilled over into the towns of Pendergrass, Braselton, Jefferson (Jackson County) and other areas located beyond Reis’ current submarket boundaries.
  • Speculative development became very active here, rendering the submarket vulnerable to oversupply, which emerged when the economy soured.
  • Big boxes near in the Northeastern submarket appear to be among “the most stable” industrial properties metrowide, notes JLL.
  • Warehouse/distribution. Reis counts current warehouse/distribution existing inventory in its suburban Northeast Atlanta submarket at 56.1 million square feet.
  • Recent net absorption has been erratic. The total for all of 2011 was negative 90,000 square feet.
  • This year followed with the positive net absorption of 303,000 square feet through the first six months, 167,000 of which occurred during the second quarter. Moderate positive activity is expected all told for the remainder of the year.
  • Second quarter vacancy was 13.2%, down 30 basis points for the period, down 50 year to date.
  • At $3.80 psf and $3.33 psf, second quarter mean asking and effective lease rates were up 0.8% and 1.2%, respectively, for the quarter following no change the quarter before.
  • Spec construction is not a current factor. No space of that type was underway in this submarket per the date of this report.
  • In a relocation-expansion move, Mitsubishi Electric Cooling & Heating broke ground in January for a $25 million, 500,000-square- foot division headquarters facility in Suwanee. Reis expects completion in February 2013.
  • A major project. In an expansion-and-renewal deal, a June opening is cited by the Georgia governor’s office and industry sources for children’s clothier Carter’s Inc.’s $50 million, 1.0-million-square foot, e-commerce distribution center in Braselton. Carter’s signed the lease on March 29. The initial term, with options to renew, ends in 2023, according to reports.
  • In detail. As described by JLL, the Carter’s deal entails a 556,394- square-foot renewal and a 505,269-square-foot expansion.
  • Dish Network is looking for 450,000 to 750,000 square feet in leasing and build-to-suit opportunities along the northern I-85 corridor (JLL).
  • An undisclosed buyer is seeking 25 acres for a build-to-suit (JLL).
  • In another large e-commerce deal, Bed Bath & Beyond Inc. acquired an
  • 810,000-square-foot building in Walnut Fork Distribution Center in Pendergrass for $20.8 million, the Chronicle reported in March.
  • Significant second quarter leases include a 455,334-square-foot warehouse space deal by an undisclosed tenant at Atlanta Property Group’s Braselton Tech Center, reports JLL.
  • The 121,674-square-foot, four-building warehouse complex at 6190 Jimmy Carter Boulevard, Norcross, sold in June for $11.55 million ($95 psf), Reis reports. TG Regency LLC and CIVF I-GA1WI5-23 LLC were the respective buyer and seller.
  • Flex/R&D. Including second quarter’s positive 24,000 square feet, net absorption in the Northeast’s 10.8-million-square-foot Flex/R&D market for first half 2012 was negative 21,000 square feet. The 2011 total was plus 148,000 square feet.
  • Second quarter vacancy and mean asking rent were 17.7%, down from 18.0% a quarter earlier, and $5.74 psf, up two cents.

I-20 West/Douglasville

  • Signs of a recovery are seen generally in the Fulton Industrial/I-20 West area.
  • As previously described, the I-20 West/Douglasville submarket currently hosts the metro area’s only substantial industrial speculative construction project.
  • Warehouse/distribution. Reis reports total existing I-20 West/Douglasville warehouse/distribution inventory at 26.1 million square feet.
  • Net absorption in 2011 all told was negative 296,000 square feet.
  • First quarter 2012’s extraordinary 616,000 square feet of positive net absorption, likely a result in part from New Breed Logistics’ 439,000- square-foot lease, were followed by negative 240,000 square feet the quarter after.
  • Substantial gains over the remainder of the year, however, should result in total 2012 net absorption at close to 1.0 million square feet.
  • That total will be accompanied by the delivery of 650,000 square feet, as described below. No space completed construction in this submarket in 2011.
  • Second quarter vacancy was 14.6%, up 90 basis points from the quarter before, down 90 year over year.
  • At $2.94 psf and $2.61 psf, second quarter average asking and effective rents were up 0.3% and 0.4% for the period and were up 0.3% and 1.6% since year-end, respectively.
  • New Spec. Industrial Developments International Inc. (IDI) is building the 650,000-square-foot Building A at Riverside Business Center in Lithia Springs, the first major speculative industrial construction in Atlanta in a number of years. Construction began in January and will complete in October, Reis reports.
  • IDI also is planning 1 million square feet of warehouse-distribution and manufacturing development for a 200-acre site at its 170-acre Riverside Business Park, the Chronicle reported recently.
  • McMaster Carr is “actively considering” development of a 1.0 million- square-foot build-to-suit facility in the I-20 West corridor, reports JLL.
  • Poma Glass was “closing in” on a lease deal of 150,000 to 200,000 square feet as of mid-year.
  • A large sale. LaSalle Investment Management paid Stockbridge Capital Group $40.0 million ($44 psf) in May for the 100%-occupied, 913,000-square-foot Quaker Oats Company distribution center in Lithia Springs, Reis reports.
  • Tech—a major project. Rooker Company is planning the 320-acre Riverside West Business Park “technology corporate park” for a site in Douglas County, the Chronicle reported in late June. “We are hoping to attract Fortune 500 companies,” stated a Rooker executive.
  • More. “The park, which will include 2.9 million square feet of developed space, could host data centers, R&D operations, and corporate headquarters,” related the report. It “will be marketed to technology, healthcare, financial and educational businesses.”
  • Competition. A similar project, the $200-million-plus Riverside at Sweetwater Creek, is being developed nearby.
  • More. Planned for Sweetwater Creek: “About 2.5 million square feet of developed space . . . to house headquarters, research and development operations, and data centers.”
  • Commentary. “The two proposed business parks reflect Douglas County’s efforts to pivot away from retail and distribution,” as reported by the Chronicle. “The western suburb wants to diversify into attracting data centers, advanced manufacturing and research and development operations—which lure big-ticket investments and high-paying jobs.”

I-20 West/Fulton Industrial Corridor

  • Warehouse/distribution. Reis counts 43.0 million square feet of existing inventory in its I-20 West/Fulton Corridor warehouse/distribution submarket.
  • Net absorption for first half 2012 all told was positive 421,000 square feet; the total for second quarter alone was 577,000. The total for all of 2011 was 477,000 square feet.
  • No space completed construction in this submarket in 2011 or in 2012 year to date. None was underway or planned per this report date.
  • Second quarter vacancy was 15.9%, down 130 basis points for the period, down 70 year over year.
  • At $2.55 psf and $2.19 psf, second quarter average asking and effective rents were up 1.2% and 1.4%, respectively, for the quarter following no change the quarter before.

Other; East—Social Circle

The far eastside suburbs (near Covington),

  • has drawn a couple of major projects over the past few years. More are planned.
  • The latest is healthcare conglomerate Baxter International Inc.’s $1 billion, 1.0-million-square-foot manufacturing plant planned for the 1,600-acre Stanton Springs master-planned community near Social Circle (within the I-20 E/SE Atlanta submarket).
  • More. Groundbreaking in the Baxter plant took place on August 1. “Construction will continue into 2016 and the plant is expected to begin commercial production in 2018,” reports the Chronicle.
  • Reis reports more than 1.5 million square feet in five warehouse-distribution sector buildings proposed for Stanton Springs Business Park.
  • In an area of Social Circle located within the Highway 78 East submarket, the town also hosted the 2010 completion of a 1.5-million- square-foot distribution center for
  • General Mills.