The Atlanta economy continued the momentum of healthy job growth. The Atlanta metropolitan area (metro Atlanta) has added 97,500 non-farm jobs since the first quarter of 2016. Even though Atlanta experienced overall employment gains, the unemployment rate ticked up to 5.2 percent from 5.1 percent a year ago. The rise in unemployment can be attributed to more Atlanta residents looking for work and not finding jobs immediately.
The Atlanta industrial market experienced a record-breaking first quarter with a significant amount of overall net absorption, a falling vacancy rate and an increase in overall asking rents. The Atlanta market experienced 6.4 million square feet (sf) of positive net absorption, the highest amount ever recorded in Atlanta’s history. The previous record of 6.1 million square feet was set in the fourth quarter of 2014. The I-20/Fulton Industrial submarket dominated absorption to start the year with 2.6 million square feet of overall net absorption. Google’s move into their 800,000 square feet data center expansion coupled with Shipper’s Warehouse’s move into 540,000 square feet of warehouse space accounted for the majority of positive absorption in the I-20/Fulton Industrial submarket. First quarter 2016 marked the 16th consecutive quarter with at least 1 million square feet of positive net absorption.
Leasing activity to start 2017 increased by nearly 2 million square feet year-over-year with 6.0 million square feet of space leased this quarter from only 4.1 million square feet leased in the first quarter of 2016. This is an impressive 45 percent increase in leasing activity year-over-year. The Northeast lead all submarkets with 1.7 million square feet of leases signed in the first three months of the year, followed by the I-20/Fulton Industrial submarket with 1.1 million square feet of leases signed.
Overall asking rents jumped from $4.20 per square foot last quarter to $4.31 per square foot in the first quarter of 2017. This marks the highest industrial overall asking rental rates since the second quarter of 2003 when asking rates reached $4.35 per square foot. Meanwhile, vacancy dropped from 9.0 percent to 8.7 percent.
Atlanta had 6.3 million square feet of completions in the first quarter, the fourth most ever recorded. Speculative projects accounted for 4.4 million square feet of completions, and the remaining 1.9 million square feet was build-to-suit product. In spite of the large amount of deliveries, there is still 15.5 million square feet of industrial space under construction. This indicates Atlanta is on pace to post another yearly record for industrial construction completions in 2017. Investment sales also made a strong showing in the first quarter with 6 million square feet of industrial product trading hands.
Looking forward, 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 strong absorption and leasing activity suggest that the Atlanta industrial market will remain active and consistent throughout 2017.
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