Atlanta, GA Industrial Market Report
Market Overview
Atlanta’s industrial market slowed in H1 2023 after a period of tightening vacancies and increased leasing activity. Move-outs and layoffs in the distribution sector contributed to a decrease in absorption, while a wave of new supply coincided with a softening in preleasing. Large-box speculative construction may create higher availability in spaces over 250,000 square feet, particularly in exurban areas along Interstate 75. Rent gains for well-located assets in Atlanta continue, although the growth rate is slowing due to increased available space. The challenging financing environment in 2023 may strengthen market fundamentals in the long term by reducing construction starts, resulting in fewer deliveries in 2024 and 2025. Overall, Atlanta is likely to remain an affordable and profitable industrial market.
Highlights
- Despite reaching record lows in 2022, Atlanta’s vacancy rate increased to 4.5% in H1 2023; nevertheless, it still stands significantly below the market’s 10-year average of 6.4%.
- Over the next two years, there are plans to construct an additional 29.6 million square feet of space, with more than 70% of that space currently unleased.
- Atlanta remains one of the leading markets in the U.S. for overall industrial investment.
- Atlanta offers significantly lower rental rates compared to major distribution markets on the West and East Coasts, with average asking rents around $8.70 per square foot.
Rents | Vacancy | Construction
Atlanta’s rent growth has outperformed historical averages, but a slight slowdown in early 2023 has led to lower year-over-year accelerations. Despite this, the trailing 12 month rent growth of 10.6 percent still outperforms the national benchmark of 9.0 percent. In addition, the average asking rent in Atlanta is approximately $8.70 per square foot, which is significantly lower than the national average of around $11.60 per square foot, according to CoStar Group. The market has experienced four consecutive quarters of rising vacancies and currently stands at 4.5 percent. Reduced leasing activity and an upturn in new property completions caused this rise in vacancies.
About 3.7 percent of Atlanta’s existing inventory consists of under-construction projects, surpassing the national benchmark of 3.3 percent. New developments in Atlanta are increasing in size and height. The average clear height of buildings that have recently entered the market is approximately 36 feet, and there are new or under construction projects with clear heights reaching 40 feet, as stated by CoStar Group.
Atlanta is among the top five cities in the U.S. regarding the industrial supply currently under construction.
Sales
Although Atlanta is an excellent market for industrial investment, there was a significant slowdown in sales volume during H1 2023. The tightening of credit markets in 2023 has resulted in a smaller group of buyers actively participating in the market. Market participants have observed a divergence between buyers and sellers regarding cap rates, which have increased after a period of compression. 12-month sales volume currently stands at $4.6 billion, but as long as uncertainty continues, investment activity is expected to remain subpar compared to less volatile years.
Despite economic uncertainty, Atlanta remains a prominent market for overall industrial investment in the country.
Atlanta, by the numbers in the past 12 months
- Vacancy Change (YOY): 1.2%
- Net Absorption SF: 12.3M
- Deliveries SF: 23.3M
- Rent Growth: 10.6%
- Sales Volume: $4.6B
Source: CoStar Group
