1Q 2011 | Atlanta Industrial | Market Report by Colliers International

Q1 2011 | INDUSTRIAL

ATLANTA

MARKET REPORT

1Q Industrial Absorption Strongest Since 2007

MARKET INDICATORS Projected

Q1 2011

Q2 2011

VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE

—

CAP RATES

—

Beginning the year on a high note, Atlanta’s industrial market experienced its strongest quarter of absorption in four years. Occupancy increased by 2.6 million square feet this quarter which is an amount higher than all of 2010’s occupancy gain. The positive absorption in first quarter represents the fourth consecutive period with more tenants moving into space than moving out, meaning recovery is in full stride for the Atlanta industrial market. As would be expected from a strong quarter of absorption, the overall vacancy rate dropped 0.2% from year-end 2010, marking the fourth quarter in a row with a decline in vacancy. In fact, since this time last year, over 1.7 million square feet of vacant industrial space has been filled in Atlanta. The largest contributors to this quarter’s positive activity were consumer product companies expanding in the Atlanta market. Almost half of first quarter’s absorption can be tied to Clorox moving into its new 1.2 million square feet build-to-suit in South Atlanta. The company began consolidating from other area facilities in February. The new distribution facility is expected to be fully utilized by the beginning of May. Also of note, Phillips Van Heusen completed its move into 851,349 square feet at Liberty Industrial Park also in South Atlanta. This represents an expansion of the company’s industrial presence in Georgia, almost doubling its previous size. On the whole, the largest move-ins this period benefited South Atlanta the most. Industrial absorption in the submarket totaled just over 2 million square feet in first quarter. South Atlanta’s location and transportation infrastructure have made it superior to other industrial submarkets. Because of these factors, the submarket is seeing the most activity. As upbeat as first quarter proved to be, it will likely be the strongest period of the year. Industrial absorption topping 2.5 million square feet in a quarter, though welcomed, is highly unlikely to continue in today’s economic climate. More than 75% of Atlanta’s first quarter absorption can be tied to two large tenant moves. Over the past year, Atlanta’s industrial market has benefited from large move-ins continued on page 2

ATLANTA INDUSTRIAL

NEW SUPPLY, ABSORPTION AND VACANCY RATES

UPDATE Atlanta Rental Rates Overall Market & Warehouse (per sq. ft.)

25,000,000

18%

$4.00

$4.25

20,000,000

$4.00

$3.75

14%

$3.75

$3.50

Absorption

www.colliers.com/atlanta

Deliveries

2011

2010

2009

2008

2007

(5,000,000)

2006

Warehouse

2011 2011

2010 2010

2009 2009

2008 2008

Market AVG

0 2005

$2.50

6% 5,000,000

2004

$2.75

2003

$3.00

10% 10,000,000

2002

$3.25 $3.25

15,000,000 Square Feet

$3.50

Vacancy %

-2%

For the fourth consecutive quarter the Atlanta industrial market saw occupancy increase. First quarter’s positive absorption totaled 2,622,899 SF. Overall vacancy dropped by 0.2% in the quarter despite the delivery of 1.6 million square feet. Clorox’s build-to-suit of 1,150,000 SF was the largest building delivered. Atlanta’s total industrial i n ventor y is now 5 95 million square feet.

MARKET REPORT | Q1 2011 | INDUSTRIAL | ATLANTA

•

As a result of consecutive quarters of positive activity, vacant industrial space in Atlanta is at its lowest point in a year.

•

Flex product was the only property type to see an increase in vacancy in the quarter. The submarket most affected by the lack of demand for flex space is North Central Atlanta.

•

Large blocks of available space 800,000 SF and up remain limited at 6. Lowe’s recent purchase of a 1.3 million sq. ft. warehouse relieved the market of one of its largest availabilities.

Q1 2011 | Vacant Space By Type

•

First quarter industrial absorption was the highest in four years.

•

Most of the largest move-ins this quarter were located in South Atlanta. Along with Clorox and Phillips Van Heusen, the Army Airforce Exchange Services and Caterpillar Logistics also occupied large spaces.

•

The largest lease signed in the quarter was Electrolux which will relocate from Chattanooga, Tennessee to 600,000 SF of warehouse space in South Atlanta. Occupancy is expected in May.

Q1 2011 | Net Absorption by Submarket

1,500,0000

SHALLOW-BAY 12,064,878 SF VCY RATE = 15.1%

FLEX 8,609,884 SF VCY RATE = 15.8%

Build-To-Suit-A term describing property that

1,000,0000 500,0000 00

was developed specifically for a certain tenant to occupy. Can be either leased or owned by tenant.

(500,000)0)

Warehouse

Shallow-Bay

Flex

(1,000,000)0)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

1187 E Hightower Trail

Snapfinger/I-20 East Ind

3/29/2011

$33,800,000

1,370,000

$24.67

Industrial Income Trust

235 Hog Mountain Rd.-A

Northeast Atlanta Ind

2/24/2011

$22,000,000

459,134

$47.92

LaSalle Investment Mgmt.

2221 Northmonth Pky.-700

Northeast Atlanta Ind

4/7/2011

$14,500,000

171,286

$84.65

Colony Realty Advisors

8400 Tatum Rd.

South Atlanta Ind

2/23/2011

$12,750,000

1,337,487

$9.53

Lowe’s Home Centers

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

7780 Spence Rd.

South Atlanta Ind

Electrolux

400 Princeton Blvd.

Northwest Atlanta Ind

Shaw Industries

4800 Coates Dr.

South Atlanta Ind

Exel

200-210 Interstate South Dr.

South Atlanta Ind

GENCO ATC

P. 2

| COLLIERS INTERNATIONAL

LANDLORD

SIZE SF

TYPE

ING Clarion

600,000

Warehouse Lease

CommonWealth REIT

292,000

Warehouse Renewal

MD Hodges

289,106

Warehouse Lease

Space Center

256,320

Warehoues Renewal

I-20W | FULTON IND

WAREHOUSE 61,608,521 SF VCY RATE = 13.4%

CHATTAHOOCHEE

2,000,0000

footage that is committed to and signed for under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity for buildings under construction or planned.

CENTRAL ATLANTA

2,500,0000

Leasing Activity-The volume of square

STONE MOUNTAIN

Flex-A type of building designed to be versatile, which may be used in combination with office, R&D, quasi-retail sales and industrial warehouse and distribution uses. Typically has at least 50% office and ceiling heights under 18’.

ABSORPTION & LEASING ACTIVITY

SNAPFINGER | I-20 EAST

Shallow-Bay Distribution-A type of building designed to be used for the distribution of materials or as a medium-sized manufacturing facility. Typically has 10%-30% of office, ceiling heights of 18’-24’ and bay depths of 120’-190’.

VACANCY & AVAILABILITY

NORTH CENTRAL

Bulk Warehouse-A type of building designed to be used for bulk storage or materials, distribution or heavy manufacturing. Typically has a small amount of office space, ceiling heights of 24’ and bay depths of over 190’.

NORTHWEST ATLANTA

Vacancy Rate-A percentage of the total amount of physically vacant space divided by the total amount of existing inventory.

SOUTH ATLANTA

occupied space over a given period of time, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

NORTHEAST ATLANTA

Absorption (Net)-The net change in

dominating a quarter’s occupancy gains. Examples include General Mills (1.5 msf), Kraft (980,000 SF) and this quarter’s Clorox and Phillips Van Heusen move-ins. Although the market is recovering and demand is picking up, there just is not enough in the pipeline to consistently fill 2 million square feet each quarter through the remainder of the year. In fact, second quarter has already started in a hole as Clorox phases out 607,000 SF of occupancy at Camp Creek Trade Center bringing its new facility fully operational. Nevertheless, recovery is in motion and optimism in the market is at its highest in years. Industrial leasing continues on a steady course with transactions under 100,000 SF the most active currently. In addition, and most important to filling existing vacancy, development activity remains in check. Though a few bumps are expected, Atlanta’s industrial market is poised for another positive year.

Square Feet

DEFINITIONS

MARKET REPORT | Q1 2011 | INDUSTRIAL | ATLANTA

UPDATE

Market Comparisons

VACANCY

PROP TYPE

BLDGS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY %

CENTRAL ATLANTA IND. Flex 90 Shallow-Bay 53 Warehouse 209 Total 352

3,038,604 1,617,147 11,494,967 16,150,718

8.4% 4.4% 9.9% 9.0%

CHATTAHOOCHEE IND. Flex 106 Shallow-Bay 30 Warehouse 356 Total 492

2,655,547 915,204 17,954,133 21,524,884

10.3% 12.7% 7.7% 8.2%

I-20 W / FULTON IND. Flex 91 Shallow-Bay 228 Warehouse 726 Total 1,045

2,906,381 13,148,849 74,749,753 90,804,983

SUB VCY %

VCY CURR %

VCY PRIOR %

NET ABSORP CURR SF

NET ABSORP YTD SF

DELIVERIES NEW SUPPLY CURR SF

U/C

NEW SUPPLY YTD SF

RENT

UNDER AVG CONSTR RENT SF (NNN)

255,112 71,500 1,133,548 1,460,160

8.4% 4.4% 9.9% 9.0%

6.8% 3.9% 9.7% 8.6%

(47,992) (8,000) (17,344) (73,336)

$10.50 $2.42 $3.66 $4.26

0.7% 0.0% 0.0%

272,563 123,028 1,381,712 1,777,303

10.3% 13.4% 7.7% 8.3%

9.2% 13.4% 7.1% 7.6%

(29,324) 0 (103,319) (132,643)

$7.44 $3.42 $4.78 $5.13

12.8% 13.0% 15.3% 14.9%

0.7% 0.5% 0.5%

372,750 1,805,641 11,817,686 13,996,077

12.8% 13.7% 15.8% 15.4%

12.9% 14.5% 15.0% 14.9%

3,164 99,245 (580,987) (478,578)

$5.37 $2.86 $2.98 $3.00

NORTH CENTRAL ATLANTA IND. Flex 225 8,067,072 Shallow-Bay 139 5,411,680 Warehouse 344 13,350,333 Total 708 26,829,085

18.0% 9.7% 11.1% 12.9%

0.6% 0.1% 0.2% 0.3%

1,499,342 532,059 1,501,230 3,532,631

18.6% 9.8% 11.2% 13.2%

17.4% 11.9% 12.2% 13.7%

(95,677) 109,301 123,817 137,441

NORTHEAST ATLANTA IND. Flex 622 18,023,345 Shallow-Bay 474 23,885,849 Warehouse 1,598 127,366,190 Total 2,694 169,275,384

19.1% 16.6% 13.4% 14.4%

0.5% 0.1% 0.4% 0.4%

3,532,057 3,990,970 17,593,289 25,116,316

19.6% 16.7% 13.8% 14.8%

19.3% 17.3% 13.9% 15.0%

(62,290) 129,778 575,248 642,736

NORTHWEST ATLANTA IND. Flex 298 9,549,020 Shallow-Bay 217 9,327,775 Warehouse 763 41,014,548 Total 1,278 59,891,343

12.5% 14.6% 13.4% 13.4%

1.4% 0.3% 0.4%

1,323,547 1,359,363 5,611,400 8,294,310

13.9% 14.6% 13.7% 13.8%

14.4% 14.9% 14.0% 14.2%

53,895 30,882 144,101 228,878

$8.09 $4.08 $3.64 $3.93

SNAPFINGER / I-20 EAST IND. Flex 96 2,419,450 Shallow-Bay 103 4,696,563 Warehouse 397 33,890,670 Total 596 41,006,683

8.3% 12.7% 10.3% 10.5%

0.0% 0.0%

200,477 594,417 3,511,993 4,306,887

8.3% 12.7% 10.4% 10.5%

8.3% 11.5% 10.8% 10.7%

1,392 (55,387) 140,095 86,100

$4.08 $3.31 $3.23 $3.30

SOUTH ATLANTA IND. Flex 188 Shallow-Bay 228 Warehouse 1,084 Total 1,500

4,433,480 13,850,877 125,130,953 143,415,310

9.4% 16.0% 13.9% 14.0%

0.2% 0.2%

417,745 2,219,953 17,590,653 20,228,351

9.4% 16.0% 14.1% 14.1%

9.5% 15.7% 15.0% 14.9%

3,767 (48,002) 2,128,446 2,084,211

3,439,405 7,188,690 16,182,281 26,810,376

20.3% 19.0% 9.1% 13.2%

1.1% 0.1% 0.2%

736,291 1,367,947 1,467,010 3,571,248

21.4% 19.0% 9.1% 13.3%

21.8% 19.7% 9.5% 13.8%

13,815 47,188 67,087 128,090

ATLANTA MARKET GRAND TOTAL Flex 1,853 54,532,304 Shallow-Bay 1,640 80,042,634 Warehouse 5,788 461,133,828 Total 9,281 595,708,766

15.2% 14.9% 13.1% 13.5%

0.6% 0.2% 0.3% 0.3%

8,609,884 12,064,878 61,608,521 82,283,283

15.8% 15.1% 13.4% 13.8%

15.5% 15.5% 13.6% 14.0%

(159,250) 305,005 2,477,144 2,622,899

1,632,223 1,632,223

724,506 724,506

$7.27 $3.70 $3.19 $3.44

0.3% 0.4% 0.5% 0.5% 0.6%

82,283,283 83,273,959 84,557,420 84,928,716 84,035,459

13.8% 14.0% 14.2% 14.3% 14.2%

14.0% 14.2% 14.3% 14.2% 13.9%

2,622,899 1,283,461 1,370,046 815,508 (1,451,806)

2,622,899 2,017,209 733,748 (632,298) (1,451,806)

1,632,223 998,750 1,708,765 155,614

1,632,223 2,863,129 2,863,129 1,864,379 155,614

724,506 2,041,229 2,041,229 2,580,973 4,289,738

$3.44 $3.46 $3.47 $3.52 $3.57

STONE MOUNTAIN IND. Flex 137 Shallow-Bay 168 Warehouse 311 Total 616

TOTAL VCY SF

ABSORPTION

482,223 482,223

1,150,000 1,150,000

482,223 482,223

1,150,000 1,150,000

100,500 100,500

$8.55 $5.97 $5.25 $6.35

215,000 215,000

$7.87 $3.87 $3.39 $3.71

409,006 409,006

$7.32 $3.13 $2.83 $2.88

$5.97 $3.57 $3.03 $3.57

QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q1-11 Q4-10 Q3-10 Q2-10 Q1-10

9,281 9,279 9,279 9,277 9,275

595,708,766 594,076,543 594,076,543 593,077,793 591,369,028

13.5% 13.6% 13.7% 13.8% 13.6%

NOTE: STATISTICAL SET INCLUDES ALL INDUSTRIAL PROPERTIES 10,000 SF AND UP, EXCLUDING HEAVY MANUFACTURING PROPERTIES. WHILE COSTAR ATTEMPTS TO PROVIDE THE MOST ACCURATE DATA AT THE END OF EVERY QUARTER, REVISIONS ARE MADE THROUGHOUT THE YEAR ACCOUNTING FOR DISCREPANCIES IN PAST REPORTING.

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 3

MARKET REPORT | Q1 2011 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

Two buildings totaling 1,632,223 SF delivered this quarter. These were the build-to-suits for Clorox in South Atlanta and Aldi in Northeast Atlanta.

•

Construction activity is centered around two build-to-suits. Facilities for FedEx and SANY America are currently in development and expected to deliver later this year.

SALES ACTIVITY Investment sales totaled approximately $86 million in the first quarter. This represents a 100% increase in dollar volume from first quarter 2010.

•

Speculation on Lowe’s Atlanta plans ended with the company buying a 1.3 million sq. ft. warehouse for $12.75 million in February.

•

The absence of large spec development continues to benefit existing market vacancy.

•

480 offices in 61 countries on 6 continents

Atlanta industrial rents continue to show downward movement. This quarter’s average is down slightly to $3.44/sf NNN.

•

United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95 •

$2 billion in annual revenue

• Over 2 billion square feet under

management

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

• Over 15,000 professionals

318 Cooper Circle

South Atlanta Ind

409,006

Second Quarter 2011

FedEx Build-To-Suit

Northeast Atlanta Ind

215,000

Fourth Quarter 2011

UNITED STATES:

3200 Webb Bridge Rd.

North Central Atlant Ind

100,500

Fourth Quarter 2011

Atlanta Mike Spears SIOR Senior VP | Colliers Manager Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 888 9000 FAX +1 404 870 2845

Canton GAINESVILLE Cumming

CHEROKEE CO. F FULTON CO. F FORSYTH CO.

Allatona Lake

son

Lake Lanier

Woodstock

FO RS FU

Mountain Park

CHEROKEE CO.

Acworth

H YT O LT

OW CO.

Alpharetta

CO . CO .

Brase

NORTHEAST ATLANTA

e hooch e tac

Cha t

PAULDING CO. COBB CO.

NORTHWEST ATLANTA

INDUSTRIAL SUBMARKETS

Buford

HA GW INN LL CO . ETT CO .

Sugar Hill

NORTH CENTRAL ATLANTA

Rive r

BARTOW CO. CHEROKEE CO.

ersville

Roswell

Duluth

316 CO BB FU LT CO O . N CO .

MARIETTA

Lawrenceville DORAVILLE Norcross

CHAMBLEE SMYRNA

ATLANTA

DECATUR Avondale Estates

SNAPFINGER I-20 EAST

att

ho ac

CO .

R iv

ch e

glasville

EAST POINT COLLEGE PARK HAPEVILLE

DEKALB HENRY

Hartsfield-Jackson International Airport

CLAYTON CO.

Union City Fairburn

FULTON CO. COWETA CO.

Palmetto

. ON CO FULT CO. TTE FAYE

675

CO. CO.

W AL TO N

CO .

Lithonia

Conyers Covington RO C NE KDA WT LE ON CO CO . .

I-20 WEST / FULTON INDUSTRIAL

Snellville

STONE MOUNTAIN Stone Clarkston INDUSTRIAL Mountain

DE KALB RO CO CK . DA LE CO .

COBB CO. DOUGLAS CO.

GW IN DE NE KA TT LB C CO O. .

CENTRAL ATLANTA

G W IN NE TT

CHATTAHOOCHEE INDUSTRIAL

Austell

PAULDING CO.

DEKALB CO. FULTON CO.

Powder Springs

FOREST PARK Riverdale

Stockbridge

SOUTH ATLANTA

The Atlanta industrial market consists of nine submarkets. They include Central Atlanta, Chattahoochee Industrial, I-20 West/Fulton Industrial, North Central Atlanta, Northeast Atlanta, Northwest Atlanta, Snapfinger/I-20 East, South Atlanta and Stone Mountain Industrial. The major interstates in the region include: I-75, I-85, I-285, I-575, I-985, I-675 and I-20. Georgia 400 and US 316 also play important roles to Atlanta’s transportation system.

RESEARCHER: Atlanta Scott Amoson Director of Research Two Midtown Plaza | Suite 1100 1349 West Peachtree Street, NE Atlanta, Georgia, 30309 TEL +1 404 877 9286 FAX +1 404 870 2845

Jonesboro

McDonough

nan

BU TT S

CO .

HENRY CO. CLAYTON CO.

Fayetteville

This market report is a research document of Colliers International. Information herein has been deemed reliable and no representation is made as to the accuracy thereof. Colliers International-Atlanta, Inc., and certain of its subsidiaries, is an independently owned and operated business and a member firm of Colliers International Property Consultants, an affiliation of independent companies with over 480 offices throughout more than 61 countries worldwide.

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