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Atlanta Office & Industrial Market Reviews: Q1 2019

FIRST QUARTER, 2019

Atlanta Office Market

Thanks to a limited supply pipeline and steady demand, Atlanta’s office market is as healthy as it has been in decades. Even though construction is ramping up, the amount of new supply underway still falls short of Atlanta’s historical average. Still, several recently announced projects could send construction levels higher in the near future, with much of that expected to break ground on a speculative basis. Due to consistently strong fundamentals, rent growth continues to outperform both the metro’s historical average and the national average.

Demand is diversifying across industries and submarkets. While Buckhead and Midtown have always attracted big office users, many of the largest leases signed in Atlanta over the past several years have involved large national companies in submarkets outside the core.

Investment activity in Atlanta remains robust. Over 80% of institutional-grade assets have traded at least one time over the past seven years, which may be a partial cause for a slow down in investment volume from mid-cycle highs. Average pricing continues to increase and average cap rates have compressed to levels well below last cycle’s trough. (See full review)

Atlanta Industrial Market

Industrial continues to surge, with logistics space dominating the market. The metro benefits from its role as a national distribution hub, the growing Port of Savannah, and from strong local demographic growth. Vacancies have begun to tick up in recent quarters but are still well below the metro’s historical average. Sustained low vacancies have kept pricing power in the favor of owners, and rent growth continues to outperform the national benchmark.

However, with one of the largest speculative supply pipelines in the nation, vacancies in Atlanta are likely to rise in the near term. Submarkets south of Atlanta are likely to take the biggest hit. Investors continue to flock to Atlanta industrial, with the market setting a new record for sales volume each of the past two years. Pricing continues to appreciate, with average sales now coming in over $60/SF.

Atlanta remains one of the healthiest major markets in the country in terms of rent growth, and it is outperforming metros like Dallas-Fort Worth ($75/SF) and Chicago ($70/SF). However, metro-wide rents are roughly 25% above the pre-recession peak, which is below the national average mark. (See full review)