SECOND QUARTER, 2019
Thanks to a limited supply pipeline and steady demand, Atlanta’s office market is as healthy as it’s been in decades. Construction is ramping up, but the amount of new supply underway still falls short of Atlanta’s historical average. A large portion of new projects are breaking ground on a speculative basis, and roughly 50% of the current pipeline is unleased. However, strong leasing velocity, particularly in new properties in Midtown, has helped calm fears of oversupply in the near term. New supply hasn’t weighed on rents yet, as rent growth continues to outperform both the metro’s historical average and the national average.
Though sales volume has slowed from mid-cycle highs, 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 the slowdown in investment volume. Average pricing continues to increase, and average cap rates have compressed to levels well below last cycle’s trough.
Atlanta benefits from its relative affordability, above-average education levels, and the presence of an international airport. Office users choosing to relocate to or expand in the metro often don’t have to sacrifice quality of labor or accessibility, making Atlanta an ideal spot for tenants. (See full review)
The industrial market in Atlanta continues to surge. The metro benefits from its role as a regional and 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 landlords, and rent growth continues to outperform the national benchmark.
Atlanta’s low business costs, robust infrastructure, and overnight port access have made this metro an important national distribution hub. As the Southeast is expected to remain one of the fastest-growing areas in the country, demand for local and regional distribution facilities will likely persist. Demand for logistics space is expected to stay strong, but speculative supply is mounting, and vacancies are rising, albeit slowly. 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 at roughly $65/SF. (See full review)