Third Quarter Atlanta Industrial Real Estate Market

We're on a roll!  We've been saying that the Atlanta industrial market is on its way back and we are starting to see it in living color!  For details take a look at our Point of View . What are you seeing in your respective markets? Do you agree that the industrial real estate market is in deed on it's way back?

Movin' On Up!

King Industrial Realty has recorded the fifth consecutive quarter of positive net absorption!  We are happy to see this positive trend continuing and are hopeful that things keep moving in the right direction.  Read more about what King recorded for the second quarter of 2013 in our latest Point of View.  What are trends you have noticed in your respective sectors/regions?

Car makers add jobs and spend more on expansion

According to this article, the auto industry is picking up.  Do you think expansion in the industry will lead to a notable amount of absorption in the industrial real estate market or will most of the expansion be accounted for by build-to-suits?

A link to the full article is here.

Allison Evans
Associate
King Industrial Realty

Manufacturing Is Going (to New) Places: And What That Means About Jobs

This is a good article about changes we are seeing in the manufacturing industry.  It brings up the point that because of innovations, success and growth in the manufacturing industry can no longer be measured or indicated by a growing number of manufacturing jobs.  A question the author poses is whether we should be unhappy that we are losing assembly line-type jobs or be happy with companies being able to keep higher-skilled jobs on our soil and have products that read "Made in America."  What do you think?

A link to the full article is here.

 

Allison Evans
Associate
King Industrial Realty

New plants in NW Georgia to bring a total of 2,600 jobs

Mattex, a carpet backing and textile company, has announced they will be building a new plant in northwest Georgia that will employ 200 people.  This came about a week after Engineered Floors announced plans to open two new carpet plants that are expected to employ 2,400 people in the same area.  This is all great news for northwest Georgia and it looks like the flooring industry there will continue on it's path of revitalization.  A link to the AJC's article regarding the Mattex plant is here.

Incentives offered by the Department of Economic Development are discussed in a related article.  It is said that Engineered Floors could receive over $100 million in state incentives with the opening of it's two new plants. A link to that article is here.  

Both of these projects will be build-to-suit constructions, which can make activity appear to be improving.  As we have seen in the recent past, this does not usually translate to a notable impact in net absorption.  However, these projects are likely to create a need for additional suppliers and distributors.  Then, maybe we will make a dent in our high availability rates.  How big of an impact do you think these two projects will have on the Metro Atlanta industrial real estate market?

Allison Evans

Associate

King Industrial Realty

Availability rate in Atlanta’s industrial market still high, but continues to decline

The Metro Atlanta industrial real estate market still has a long way to go on the road to recovery, but availability rates do seem to be making a slow and steady improvement.  In the first quarter of 2011 we recorded an availability rate of 21.2%, which was a record high for Atlanta’s industrial market.  The first quarter of 2013 showed an availability rate of 18.6%.  As Sim Doughtie says in our latest Point of View, “This marks the eight consecutive quarter of reduced availability – further testimony that we are moving in the right direction.”

Total amount of square feet available for new and used space at the end of the first quarter this year came to a little over 110,000,000.  This is still a long way from the lower figures we were seeing in 2008 and earlier, which were around only 80,000,000 square feet.  Hopefully we continue to see declining rates of availability in months to come.

Allison Evans

Associate
King Industrial Realty

Net Absorption in the 1st Quarter of 2013 Continues Positive Trend!

It’s been great to hear that the Metro Atlanta industrial real estate market has continued it’s slow but steady recovery into the first quarter of 2013.  I think most people were fairly pleased with absorption and activity figures for the end of 2012, however, it seemed like there was still a great deal of skepticism as to whether or not the positive trend would continue into 2013.  Now it’s looking like we can let our hopes get a little higher and be more optimistic about seeing a full recovery! 

Total net absorption in the Atlanta industrial real estate market was 672,123 square feet in the first quarter.  The three hottest markets for absorption and their share of the total market figure for absorption are as follows:

 I-20 West/Fulton Industrial = 40.7%

I-85/985/316 = 16.7%
Northwest = 14.1%
*Also worth noting was the I-85 Northeast market with 13.2% of total absorption.

Sim Doughtie states in our latest quarterly Point of View, “We have turned the corner on the worst market we have ever experienced in the Atlanta industrial arena.”  How confident do you feel that the positive trend we are seeing now will continue?

Allison Evans
Associate
King Industrial Realty

We Have Arrived!

Last quarter the question was asked, "Are we there yet?"  This quarter the answer  to the question is "It appears we have arrived!" The fourth quarter of 2012 produced the strongest activity and highest positive net absorption since 2007 and gave us hope we have finally begun to recover.
The first quarter of 2013 has continued that positive trend.
View our Point of View for details. What are you seeing in your respective markets?

Have you heard about King Industrial Realty’s Grey Market Program?

King tracks over 650 million square feet of space in the Atlanta Industrial Real Estate market using PinPoint, our proprietary database.  When a client is looking to purchase or lease a property, PinPoint allows us to show them all possible options. 

Our grey market program closes the gap between potential availability and actual availability by targeting specific projects to determine if a potential availability exists.  It is a proven technique that has been used repeatedly by King agents. With the client’s input, we are able to take the following information and steps to find the building or space that best suits the client’s needs.

Criteria:  Clients specify or target potential locations of interest, provide agent with their needs such as total square footage, ceiling height, rail, outside storage, etc.

Identify Target:  Utilizing PinPoint, we can identify potential buildings or spaces that are currently occupied or used that closely match our client’s established criteria.

Marketing:  King agents know who to contact and are able send out notice of a client’s potential need very quickly and efficiently because of all the information tracked through PinPoint. 

Allison Evans

King Industrial Realty
Associate

Hot and Cold Markets for Absorption in 2012

The hottest areas for absorption in the Metro Atlanta industrial real estate market turned out to be almost the same markets that were the hottest for new and used available space.  However, the Fulton Industrial market is by far the strongest when comparing amounts of positive net absorption.  At the end of 2012, it accounted for 44% of the total amount of absorption in the Metro Atlanta industrial market.  The I-85/985/316 market accounted for 14.9% and the Northwest market accounted for 14.7% of positive net absorption in Atlanta.  It is also worth noting that the Airport/I-75 South region was close behind with 14.4%.  Amount of square footage of positive net absorption in each of these markets are as follows:

I-20 West/Fulton Industrial:  3,125,444 sf

I-85/985/316:  1,058,524 sf

Northwest:  1,045,278 sf

I-75 South/Airport:  1,022,224 sf

The coldest markets for absorption in 2012 were the City of Atlanta, I-85 Northeast, and I-75/Paulding County regions.  These three regions were the only ones in Metro Atlanta to report negative net absorption.  The City of Atlanta region made up for 64.7% of the total negative net absorption, while I-85 Northeast accounted for 33.4% and I-75/Paulding County accounted for 2.1%.  Amount of square footage of negative net absorption in each of these markets are as follows:

City of Atlanta:  -1,261,300 sf

I-85 Northeast:  -653,758 sf

I-75/Paulding County:  -40,107 sf

Do you think these hot and cold markets will follow a similar trend for the remainder of 2013?

Allison Evans
King Industrial Realty
Associate

2012 Distribution Hot Markets

In 2012 Metro Atlanta’s hottest markets for used space proved to be the I-85 North corridor, the I-20 West/Fulton Industrial area, and the I-85 South/Airport market.  The I-85 North area held 24.6% of the total available used space in the Metro Atlanta industrial real estate market.  I-20 West accounted for 21.2% and I-75 South accounted for 14.4%.  Amount of square footage of available used space in each of these markets are as follows:

I-85 Northeast – 27,571,929 sf available

I-20 West/Fulton Industrial – 24,980,452 sf available

I-75/Airport – 16,481,028 sf available

Hot markets for available new space in Metro Atlanta were the I-85/985/316, I-20 West/Fulton Industrial, and Northwest markets.  About 37.1% of this space was in the I-85/985/316 area, 25.1% was in I-20 West/Fulton Industrial, and 10% was in the Northwest market.  Amount of square footage of available new space in each of these markets are as follows:

I-85/985/316 – 2,188,092 sf available

I-20 West/Fulton Industrial – 1,481,038 sf available
Northwest – 589,249 sf available

Activity in 2012 looks good, but not when compared to inventory

Activity in the Atlanta industrial real estate market has remained fairly high and stable since 2009.  The fourth quarter of 2012 showed activity at 10.2 million square feet, ending the year with a total of 45.8 million square feet of activity.  This high level of activity in the last quarter is pretty surprising because, as Sim Doughtie states in our most recent Point of View, “typically industrial activity decreases 20 to 30 percent during a quarter when national elections are held.”  The reason the Atlanta industrial market did not seem to follow the trend this time is probably because many industrial building owners decided to sell property before the end of the year to avoid an increased capital gains rate in 2013.

Although the high level of industrial activity over the last few years sounds great and seems like it means good things, when compared with inventory levels for the same time period, we have to realize that the market probably isn’t improving for us as much as we hoped. 

The top graph in the slide shown below shows the square footage of deals signed each year.  These figures have stayed fairly high even throughout economic downturns.  The bottom graph shows these same figures for square footage, but compared to the entire Atlanta industrial real estate market.  Activity, when compared to inventory, has been very low for the last several years.

Competition in today’s market is much higher than in previous times.  King Industrial currently tracks over 660 million square feet of industrial and service space in Metro Atlanta.  As the total square footage of transactions remains fairly stable, the total industrial inventory base continues to grow.   This means that activity, as a percent of total market inventory, continues to decrease.  Charlie King sums it up well as he says, “we are in a much more competitive market with more empty space, but chasing the same number of deals.”

New construction up from last two years, but does this mean anything?

Over the past ten years, new construction in the Atlanta industrial real estate market reached a high of around 14 million square feet in 2005 and a low of about 2.5 million square feet in 2011.  New construction in 2010 came to just under 2 million square feet of space.  The fourth quarter of 2012 showed new industrial construction in Atlanta to be at about 3.7 million square feet.  This is an improvement of about a million square feet over total new construction for 2011 and 2010, but does it really mean good news for the Atlanta industrial market?  I don’t think anyone can be sure. 

It is worth noting that about two-thirds of the new construction reported at the 4^th quarter of 2012 was build-to-suit and about one-third was spec construction.  Of the one-third spec construction, most of that was the IDI development. 

Although in 2012, there was a slight increase in the amount of spec construction due to IDI, we still seem to be following the same general trend of mostly build-to-suit construction for the past few years.  Since 2009, the vast majority of new construction has been build-to-suit mainly for two reasons.  First, our excessive inventory of available space keeps prices down by enough that new construction has a very hard time competing with the prices of used space.  Second, there are many older, big-box buildings that have low ceilings and not enough trailer parking.  The majority of the build-to-suit construction winds up being the consolidation of several different buildings or relocation from an old facility to a new facility that can better accommodate the needs of current users.

Build-to-suit construction can make activity appear to be improving, but we have seen that this does not usually translate to a notable impact in net absorption.  According to Charlie King, “this is because most of the companies involved in the build-to-suits are already located in Atlanta and usually give up just as much or even more space than they occupy in a new construction.  This leads to very little net absorption and more functionally obsolete buildings on the market.”

From a developer’s perspective, things are definitely not great.  The Atlanta market still has a great deal of space that needs to be absorbed and owners of older buildings are faced with a problem because these spaces are proving difficult to lease.  We are still a long way from seeing the same level of new construction that took place in 2005, but maybe it is best if we don’t reach such a high level again and avoid such a huge crash in the market over the next cycle.

4th Quarter of 2012 Shows Highest Net Absorption Since 2007

I think it’s safe to say that most people are trying not to get their hopes too high about the full recovery of the real estate market, or even the overall economy.  However, it’s hard not to be pleased after hearing that in the 4^th quarter of 2012 the Metro Atlanta industrial real estate market showed the highest amount of net absorption so far since 2007. 

The most severe negative net absorption the Atlanta industrial market has gone through took place between the 4^th quarter of 2008 and the 4^th quarter of 2010.  Since then, net absorption has been steadily improving.  At the end of last year, the Atlanta industrial market showed three consecutive quarters of positive net absorption.  The 4^th quarter of 2012 showed net absorption of 5,155,035 square feet, which is almost double that of the 3^rd quarter.

In 2009, total net absorption in the Atlanta industrial market was -17 million square feet.  This is the worst figure for net absorption that this area has ever seen.  Total net absorption for all four quarters of 2012 came out to 5.2 million square feet.  This is the first year that has shown a positive figure since 2007, when net absorption totaled 8.3 million square feet. 

Total activity in the 4^th quarter of 2012 was 45,828,684 square feet, which compares fairly well to the record high of 50,437,996 square feet of activity in the 4^th quarter of 2007.  The last few quarters have definitely shown improvement for the Atlanta industrial real estate market.  Hopefully the next few months will bring more positive figures and good news to report!

 

Are We There Yet? What A Great Question!

The statistics for 2012 in the Atlanta Industrial market were the best we have seen since 2007. Our Fourth Quarter Point of View provides additional insight.