The Atlanta economy continued to post healthy job growth throughout 2016. The Atlanta metropolitan area (metro Atlanta) has added 67,200 non-farm jobs since the start of the year according to the US Bureau of Labor Statistics. As a result of overall employment gains, the unemployment rate for metro Atlanta dropped to 4.8 percent in November, a 0.1 percentage point decrease year-over-year. In terms of the office-using sectors, employment grew 2.8 percent year-over-year, and continues to boost demand for office space throughout metro Atlanta.
The Atlanta industrial market experienced another banner year in 2016. Occupancy gains remained strong in the fourth quarter with 3.5 million square feet of positive net absorption. Leasing activity is up 8 percent from 2015 with 21.9 million square feet leased in 2016.
Fourth quarter 2016 statistics revealed that Atlanta shattered the previous delivery record set in 2000 when deliveries reached 14.9 million square feet. Speculative completions in 2016 were 15.3 million square feet, while build-to-suit completions posted 2.2 million square feet. This brings the overall construction completion total to a record amount of 17.5 million square feet. Even though 15.3 million square feet of speculative space delivered last year, more than half of that space is already leased. This proves that Atlanta is one of the most sought-after and attractive industrial markets in the nation.
Industrial net absorption in the fourth quarter of 2016 posted 3.5 million square feet, bringing the total to 13.7 million square feet absorbed for the year. The largest move-ins for 2016 were Google’s move into 1.1 million square feet in South Atlanta, Williams-Sonoma 1 million-square-foot occupancy in the Northeast and Smucker’s lease for an additional 1 million square feet in South Atlanta. Fourth quarter 2016 marked the 15th consecutive quarter with at least 1 million square feet of positive net absorption.
Leasing activity for 2016 increased over 1 million square feet from 2015 to 21.9 million square feet with 3.4 million square feet of leasing activity in the fourth quarter. Variety Wholesalers signed the year’s largest lease for 1.4 million square feet at 60 Herring Road, followed by Williams-Sonoma’s lease of 1.1 million square feet at the Braselton Commerce Center.
Even with strong leasing activity and over 3 million square feet in net occupancy gains, the market saw an increase in the overall vacancy rate. The overall vacancy rate increased 110 basis points year-over-year from 7.9 percent in 2015 to 9.0 percent in 2016. This increase in vacancy is due to a record amount of deliveries. However, Atlanta still has 14.8 million square feet of industrial product under construction. Overall triple-net asking rates decreased from a year ago from $4.29 per square foot at the end of 2015 to $4.20 per square foot in fourth quarter 2016.
Looking forward, we expect vacancy levels to remain healthy despite the large influx 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 suggest that industrial activity will remain active and consistent throughout 2017.
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