Tuesday, July 19, 2011

The Journey of a Thousand Miles . . .

. . . begins with a single step and the second quarter of 2011 is showing signs that the Atlanta industrial market may have made that first step toward recovery.

After 10 consecutive quarters of negative net absorption, the second quarter of 2011 broke free with 1,707,652 square feet of positive net absorption. In recent quarters, we have been observing some trends that were pointing toward a return to positive net absorption - most notably higher levels of activity.

Activity in the second quarter of 2011 was further evidence we are on the road to recovery. Activity remained steady at 731 deals totaling 11,927,253 square feet. Combine this with the first quarter’s level of 12,082,742 square feet and we are looking at just over 24 million square feet at mid-year. If we are able to continue at this pace, year-end activity would finish at 48 million – a level not seen since 2007.

There are two factors that are predominantly responsible for this uptick in activity. First, some larger companies are continuing to consolidate from two or three locations to one larger facility. Czarnowski Exhibit Service is a perfect example of this consolidation. They returned three locations totaling 434,000 square feet to the market, but took one space for 568,000 square feet off the market. This one consolidation resulted in positive net absorption of 134,000 square feet.

The second factor we are seeing is the smaller firms and “mom-and-pop” shops getting off the sidelines and into the game. Unlike some of their competitors, they have survived this latest economic downturn and are looking to pick up the customers those competitors controlled. To properly service these new customers, however, they need to expand their business operations. Publisher Services, Inc. is an example of this type of expansion. During the second quarter of 2011, this company added 40 percent to its foothold in the Norcross area.

No one can predict if these trends will continue and we have many miles to go before we pull ourselves out of the lows we have experienced over the last three years. But, unless we experience some unforeseen major world event, we believe the Atlanta industrial market has taken the first step in that journey.

Sim F. Doughtie, CCIM, SIOR, MCR

Submarket trends and summaries can be downloaded instantly here.