As we embark on a new year, King Industrial Realty introduces a new format for our Point of View. In 1988, when we began tracking the industrial market, our records held an inventory of 200 million square feet in the metro Atlanta area. As time progressed, not only did the square footage of that inventory grow, but the geographic area holding that inventory continued to stretch beyond the boundaries of our original 12 counties.
Beginning with this issue of the Point of View, our reporting has expanded to include 20 counties and over 600 million square feet. With this expansion, new regions have been created which are detailed on the map on page four. We feel confi dent that the addition of these outlying counties will provide you a broader and more accurate picture of the Atlanta industrial market.
This quarter, in particular, shows the effect the addition of these geographic areas has on the overall picture for the industrial market. The sublease offering of the 1.3 million square foot Solo Cupspace in Walton County accounts for the large majority of the negative net absorption recorded in this first quarter of 2011. While it would be nice to take this factor out of the equation, the broader picture is more complete when all aspects are brought into play.
With net absorption still in negative territory at -1,484,869 square feet, it’s hard to say we are climbing out of the trench dug over the past four years. However, there are a few positive indicators we want to keep our eyes on. The first quarter 2011 activity of 12,082,742 square feet represents a 46 percent increase over the previous quarter and is the highest level seen since the third quarter of 2008. We are interpreting this as a sign tenants are moving off the fence and making decisions that they may have been postponing in the past.
We have also noticed that lease terms are beginning to increase. In the first quarter of 2011, 25 percent of new leases executed in the King Industrial Realty offices were for a term of five years and longer. This percentage is up from 11 percent during the first quarter of 2009 and up from 12 percent in the first quarter of 2010. Additionally, we saw a 25 percent increase in the number of new leases executed in the first quarter of 2011 as compared to the same period last year.
Again, an indication that tenants are taking action and locking in on favorable market conditions. Although we did not expect to see positive net absorption in the first quarter of 2011, we are optimistic that within the next quarter or two we will begin to see a shift to positive net absorption.
Submarket trends and summaries can be downloaded instantly here.
Sim F. Doughtie, CCIM, SIOR, MCR
Thursday, April 21, 2011
at 3:07 PM