False Start or Starting Block?
There were clearly no winners in 2009. Net absorption broke negative records, activity faltered and availability topped the 20 percent mark. At the close of the fourth quarter, however, it appears market conditions may be improving and the weather may be clearing for the 2010 season.
While net absorption in the fourth quarter remained negative, at –377,952 square feet it was a vast improvement over the previous four quarters. Of the 12 metro Atlanta submarkets, four closed the quarter with positive net absorption. The Fulton Industrial District was the clear winner for the fourth quarter, thanks to a massive build-to-suit for Kraft Foods. Net absorption in this submarket reached 942,095 square feet – a clear reversal of its third quarter performance of -1.7 million in net absorption. After recording a second consecutive quarter of positive net absorption, Area 60 (city of Atlanta South of I-20) even posted positive net absorption for the year.
Activity hit new lows during the first part of 2009, but in the closing quarter of the year, it bested the previous four quarters coming in at 9,488,628 square feet. What’s more, of the 497 deals reported, only 18 were in excess of 100,000 square feet. The I-85 North corridor, the beneficiary of six of those large deals, outpaced all other metro submarkets with 1,843,189 square feet of activity.
The vacancy rate climbed for four consecutive quarters, finally breaking the 20 percent level in the third quarter stopping at 20.2 percent. Although the fourth quarter saw an increase to 20.3 percent, that increase was a meager one-tenth of a percent – far less than the one percent average increase seen the four previous quarters. Spec construction wasn’t a contender in 2009; a whopping 79.5 percent of the 2.5 million square feet added to inventory in 2009 was build-to-suit.
In comparison to the rest of 2009, the fourth quarter seemed to gain momentum. An improvement in net absorption, a modest increase in activity and stabilization of the availability rate are all indications of a comeback. The question now . . . was the fourth quarter a false start or are we on the starting block? We’re hoping for the latter and pacing ourselves for the marathon ahead. Here’s to a New Year and a new playing field.
Sim F. Doughtie, CCIM, SIOR, MCR
Monday, March 1, 2010
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