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November 21, 2019Atlanta Office & Industrial Market Reviews: Q3 2019
THIRD 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 45% 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.
The Atlanta office market is in a solid position. Due to consistently strong demand and a relatively tame construction pipeline, vacancies have remained below the metro’s historical average for a few years. While the recent increase in speculative groundbreakings could be cause for some concern, strong leasing velocity on new deals should keep vacancies from expanding at an accelerated pace in the coming years.
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 strong local demographic growth. Vacancies have begun to tick up slightly 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.
Demand for logistics space is expected to stay strong, but speculative supply is mounting, and vacancies are already starting to rise, albeit slowly. Speculative deliveries should continue to put upward pressure on vacancies, with about 80% of the 15,500,000 SF underway is available for lease, representing one of the largest speculative supply pipelines in the country. Submarkets south of Atlanta should take the biggest hit to vacancy increases. However, if recent leasing trends persist, any rise in vacancy should be relatively gradual. Investors continue to flock to industrial assets in Atlanta, 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)