The Atlanta metropolitan area continued the momentum of healthy job growth. The Atlanta metropolitan area (metro Atlanta) has added net 74,000 non-farm jobs year-over-year since the third quarter of 2016. The unemployment rate dropped 50 basis points to 4.5 percent from 5.1 percent a year ago.
Third quarter statistics revealed that Atlanta has already experienced the most industrial net absorption ever recorded in a year. The Atlanta industrial market is experiencing a record-breaking 2017 with 16.3 million square feet of occupancy gains year-to-date. This breaks the previous record annual total of 16.1 million square feet of absorption set in 2014. As we begin the fourth quarter, the industrial market is expected to shatter 2014’s absorption record by millions of square feet. The Northeast submarket is leading the way with 3.3 million square feet of year-to-date absorption, followed closely by the Airport/South Atlanta submarket with 3.2 million square feet of absorption.
The largest move-ins this year are Variety Wholesalers’ move into 1.4 million square feet at the Shenandoah Industrial Park and Home Depot’s move into its 1 million-square-foot fulfillment center in Locust Grove, GA. Due to the record amount of occupancy gains so far this year, the vacancy rate has decreased 80 basis points year-over-year to 7.8%. This is evidence that demand and absorption is keeping pace with the record amount of new completions.
Construction completions are also approaching a new all-time high. Speculative completions so far this year total 12.1 million square feet, while build-to-suit completions total 3.0 million square feet. This brings the overall construction completion total to 15.1 million square feet for the first three quarters of 2017. With 14.8 million square feet still under construction, Atlanta is on pace to surpass last year’s delivery record of 17.5 million square feet.
Leasing activity remained strong in the third quarter of 2017 with 6.4 million square feet of leases signed. This brings the year-to-date total for 2017 to 18.4 million square feet. The Northeast dominated leasing activity with 6.3 million square feet of leases signed in the first nine months of the year, followed by the I-20/Fulton Industrial submarket with 3.8 million square feet of leases signed.
Overall asking rents jumped from $4.17 per square foot (psf) during Q3 2016 to $4.54 psf in the third quarter of 2017, an increase of 8.9% year-over-year. This marks the highest industrial overall asking rental rate since the fourth quarter of 2001, when asking rates reached $4.69 per square foot. Investment sales also made a strong showing in the first nine months of 2017 with over 16 million square feet of industrial product trading hands.
Atlanta is poised for another banner year in 2017. We expect vacancy levels to remain healthy despite the large amount of new deliveries. Strong market fundamentals coupled with increasing demand for big-box space make Atlanta one of the top markets in the nation for industrial real estate. Current indicators such as record absorption and strong leasing activity suggest that the Atlanta industrial market will remain active and consistent to close out 2017.
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