1Q 2012 | Atlanta Industrial | Market Report by Colliers International

Q1 2012 | INDUSTRIAL

ATLANTA

MARKET REPORT

Plenty of Positives for Atlanta’s Industrial Market in Q1 Industrial occupancy increased yet again for Atlanta, beginning the year where it left off in 2011. Though absorption fell short of the previous two quarters, it was positive nonetheless; by almost 1 million square feet. This pushed Atlanta’s overall industrial vacancy rate down to 13.4% which is the third consecutive period with at least some decrease in vacancy. The largest move-ins of the quarter were smaller-sized tenants below 500,000 square feet. These include Life Science Logistics moving into 255,100 square feet in South Atlanta, Pratt Industries taking 186,000 square feet also in South Atlanta and Boxercraft occupying 148,300 square feet in I-20 West/Fulton Industrial. Owens Corning was the largest occupier in the first quarter, moving into half of its 1 million-plus sq. ft. lease signed in South Atlanta. This move-in, however, was offset by the building’s former tenant Unilever, which moved out of the same amount of space during the same period of time. The net result ends up being zero space absorbed. MARKET INDICATORS Projected

Q1 2012 VACANCY

Q2 2012

—

NET ABSORPTION CONSTRUCTION RENTAL RATE

—

CAP RATES

—

First quarter’s industrial absorption was expected to be somewhat subdued compared to previous quarters simply because of the amount of move-in activity occurring in the latter half of 2011. Less than subtle, however, was the magnitude of leasing activity and announcements over the past three months impacting Atlanta’s industrial market. The biggest story lines of first quarter centered on large-sized transactions, including build-to-suits; and major manufacturing announcements. The Northeast Atlanta industrial submarket benefited most from these, specifically the Jackson County area. The submarket is beginning to see a lot of synergy and will be one of the most active regions in Atlanta this year. Most recently, Carter’s Inc. signed for a 1-million square feet lease to house an e-commerce distribution center at Park 85 at Braselton. Online business is booming for the company, prompting it to find space to accommodate expansion of its distribution capabilities. Also taking place were the announcements by Toyota Industries and Caterpillar to build manufacturing facilities in the region. Toyota plans to build a $350 million automotive parts plant in Jackson County which is expected to create 320 jobs by 2013. Caterpillar’s announcement was the biggest economic win in Georgia since the Kia Motors continued on page 2

UPDATE

ATLANTA INDUSTRIAL

NEW SUPPLY, ABSORPTION AND VACANCY RATES

Atlanta Rental Rates Overall Market & Bulk Warehouse* (per sq. ft.) $4.25 $4.25 $4.00 $4.00

30,000,000

16%

25,000,000

14%

$3.75 $3.75

$3.25 $3.25 $3.00 $3.00

www.colliers.com/atlanta

10,000,000

5,000,000

4% 2%

$2.50 $2.50

2012

2011

2010

2009

2008

2007

2006

(5,000,000)

2005

0 2004

2012 2012

2011 2011

Bulk Warehouse*

*Bulk warehouse defined as warehouse space in excess of 100,000 SF with dock loading and minimium ceiling heights of 24 ft.

10%

15,000,000

2003

Market AVG

2010 2010

2009 2009

$2.75 $2.75

12%

20,000,000 Square Feet

$3.50 $3.50

(10,000,000)

0% -2% -4%

Absorption

Deliveries

Vacancy %

Atlanta’s industrial market started the year with 995,482 square feet absorbed; the third consecutive quarter with an increase in occupancy. As a result, overall industrial vacancy decreased slightly to 13.4%. Only one building of 27,500 square feet delivered in the first quarter.

MARKET REPORT | Q1 2012 | INDUSTRIAL | ATLANTA

VACANCY & AVAILABILITY •

Not since the fourth quarter of 2009 has Atlanta’s industrial vacancy rate been this low.

•

All of Atlanta’s major industrial markets saw a drop in vacancy in the first quarter. Northwest Atlanta saw the largest percentage drop with a 0.5% decrease. This can be attributed to small-business growth in the submarket.

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’.

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 •

Absorption was positive for the third straight quarter. First quarter’s occupancy gains were mostly in warehouse and distribution properties.

•

South Atlanta once again led the Atlanta market in space absorbed; though I-20 West/Fulton Industrial, Northeast Atlanta and Northwest Atlanta saw solid activity as well.

•

Since this time last year, vacant space available has decreased by almost 6.4 million square feet.

•

First quarter leasing activity was highlighted by large-sized transactions.

•

Atlanta’s industrial market is on track to see vacancy dip below 13% by the end of the year.

•

Absorption will likely be subdued again next quarter, but stronger in the second half of the year.

Q1 2012 | Vacant Space By Type

Q1 2012 | Net Absorption by Submarket 400,000

Leasing Activity-The volume of square

Build-To-Suit-A term describing property that

100,000

I-20W | FULTON IND

FLEX 9,637,134 SF VCY RATE = 16.9%

200,000

NORTHWEST ATL

SHALLOW-BAY 10,940,660 SF VCY RATE = 14%

NORTHEAST ATLANTA

WAREHOUSE 59,823,521 SF VCY RATE = 12.8%

SOUTH ATLANTA

300,000

Square Feet

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.

CHATTAHOOCHEE

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’.

NORTH CENTRAL

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

CENTRAL 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.

STONE MOUNTAIN

Absorption (Net)-The net change in

plant in West Point, Georgia. The company plans to build a tractor and excavator plant on 900 acres in Athens, Georgia. Although not technically located in the Atlanta industrial market, the impact will be felt via parts suppliers and manufacturers locating facilities in the submarket to support Caterpillar’s operations. In addition to the activity taking place in Northeast Atlanta, the South Atlanta industrial submarket continues to see major transactions. Georgia-Pacific’s build-to-suit of 900,000 square feet in Henry County was one of the quarter’s largest transactions. The company will be using the distribution center for its consumer products business. Also, Home Depot recently moved a step closer to a 1-million square foot distribution center in the same area. All in all, activity in Atlanta’s industrial market remains in high gear. First quarter proved to be better than expected. Looking forward to the end of the year, leasing activity will continue to surprise while absorption will continue to show solid gains.

SNAPFINGER | I-20E

DEFINITIONS

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

(100,000)

Warehouse

Shallow-Bay

Flex

(200,000)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

Chastain Distr. Center

Northwest Atlanta Ind

1/25/2012

$18,125,000

357,600

$50.69

Cabot Industrial Properties

1950 Vaughn Rd.

Northwest Atlanta Ind

1/27/2012

$12,800,000

162,451

$78.79

Clarion Partners

Brickton I-IV

Northeast Atlanta Ind

3/15/2012

$11,500,000

257,890

$44.59

Cobalt Industrial REIT

1680-1700 Executive Dr.

Northeast Atlanta Ind

1/25/2012

$10,281,396

201,596

$51.00

Cabot Industrial Properties

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

Park 85 at Braselton

Northeast Atlanta Ind

Carter’s Inc.

Duke

1,061,663

Distribution Lease

8095 McLarin Rd.

South Atlanta Ind

Owens Corning

ProLogis

1,044,288

Warehouse Lease

493 Westridge Pky.

South Atlanta Ind

Georgia-Pacific

Panattoni

900,640

Build-To-Suit

5400 Fulton Industrial Blvd.

I-20 West/Fulton Ind

New Breed Logistics

Panattoni/CalSTRS

439,487

Warehouse Lease

P. 2

| COLLIERS INTERNATIONAL

SIZE SF

TYPE

MARKET REPORT | Q1 2012 | INDUSTRIAL | ATLANTA

UPDATE

Market Comparisons

VACANCY

BLDGS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY %

SUB VCY %

CENTRAL ATLANTA IND. Flex 91 Shallow-Bay 43 Warehouse 239 Total 373

2,711,420 1,438,733 11,872,811 16,022,964

7.9% 7.4% 7.5% 7.6%

CHATTAHOOCHEE IND. Flex 111 Shallow-Bay 27 Warehouse 361 Total 499

2,677,524 862,949 17,610,367 21,150,840

10.5% 16.6% 8.4% 9.0%

I-20 W / FULTON IND. Flex 97 Shallow-Bay 218 Warehouse 763 Total 1,078

3,054,918 12,800,114 75,126,613 90,981,645

DELIVERIES NEW SUPPLY YTD SF

RENT

UNDER CONSTR SF

AVG RENT (NNN)

VCY PRIOR %

NET ABSORP CURR SF

NET ABSORP YTD SF

213,654 107,090 889,396 1,210,140

7.9% 7.4% 7.5% 7.6%

10.0% 7.1% 6.8% 7.4%

57,449 (4,780) (83,060) (30,391)

$9.74 $2.71 $3.50 $3.93

0.0% 0.0%

281,073 142,870 1,480,992 1,904,935

10.5% 16.6% 8.4% 9.0%

10.1% 13.1% 7.8% 8.3%

(11,852) (30,000) (98,767) (140,619)

$6.43 $3.85 $4.45 $4.62

16.5% 12.7% 14.5% 14.3%

0.1% 0.3% 0.3%

504,621 1,631,005 11,179,242 13,314,868

16.5% 12.7% 14.9% 14.6%

15.3% 13.4% 15.2% 14.9%

(36,585) 83,253 206,764 253,432

$6.48 $2.50 $2.92 $2.92

NORTH CENTRAL ATLANTA IND. Flex 251 8,476,299 Shallow-Bay 115 4,684,516 Warehouse 397 15,270,513 Total 763 28,431,328

22.0% 7.6% 10.3% 13.4%

0.2% 1.0% 0.2% 0.3%

1,883,555 403,264 1,606,496 3,893,315

22.2% 8.6% 10.5% 13.7%

21.7% 7.0% 10.4% 13.2%

(42,904) (73,227) (16,233) (132,364)

$9.47 $6.75 $4.55 $6.41

NORTHEAST ATLANTA IND. Flex 634 18,517,727 Shallow-Bay 467 23,436,739 Warehouse 1,611 127,792,777 Total 2,712 169,747,243

20.1% 13.8% 12.8% 13.8%

0.7% 0.3% 0.3% 0.3%

3,848,600 3,308,611 16,779,304 23,936,515

20.8% 14.1% 13.1% 14.1%

20.6% 13.9% 13.4% 14.3%

(13,470) (45,072) 349,711 291,169

27,500 27,500

NORTHWEST ATLANTA IND. Flex 302 9,806,416 Shallow-Bay 216 9,279,135 Warehouse 802 41,871,591 Total 1,320 60,957,142

12.9% 11.9% 12.9% 12.7%

1.4% 0.3% 0.4%

1,393,845 1,105,474 5,511,872 8,011,191

14.2% 11.9% 13.2% 13.1%

14.2% 12.1% 13.7% 13.6%

(5,294) 20,182 243,473 258,361

$7.54 $3.79 $3.75 $4.08

SNAPFINGER / I-20 EAST IND. Flex 119 3,002,413 Shallow-Bay 103 4,703,011 Warehouse 430 36,561,491 Total 652 44,266,915

7.4% 12.9% 10.5% 10.6%

223,177 605,360 3,851,471 4,680,008

7.4% 12.9% 10.5% 10.6%

8.0% 13.3% 10.8% 10.9%

16,488 22,010 115,418 153,916

$6.81 $2.76 $3.01 $3.07

SOUTH ATLANTA IND. Flex 229 Shallow-Bay 220 Warehouse 1,136 Total 1,585

5,198,359 13,621,342 125,211,270 144,030,971

9.0% 18.7% 11.8% 12.3%

0.3% 0.1% 1.7% 1.5%

481,619 2,561,977 16,834,904 19,878,500

9.3% 18.8% 13.4% 13.8%

8.8% 20.7% 13.5% 14.0%

(26,413) 251,990 114,839 340,416

STONE MOUNTAIN IND. Flex 135 Shallow-Bay 167 Warehouse 309 Total 611

3,415,846 7,091,207 15,947,134 26,454,187

23.6% 15.2% 10.5% 13.4%

0.1% 0.1%

806,990 1,075,009 1,689,844 3,571,843

23.6% 15.2% 10.6% 13.5%

22.6% 15.6% 10.7% 13.5%

(36,534) 28,837 9,259 1,562

ATLANTA MARKET GRAND TOTAL Flex 1,969 56,860,922 Shallow-Bay 1,576 77,917,746 Warehouse 6,048 467,264,567 Total 9,593 602,043,235

16.4% 13.9% 12.2% 12.8%

0.5% 0.2% 0.6% 0.5%

9,637,134 10,940,660 59,823,521 80,401,315

16.9% 14.0% 12.8% 13.4%

16.7% 14.4% 13.0% 13.5%

(99,115) 253,193 841,404 995,482

27,500 27,500

1,664,297 1,664,297

$7.33 $3.46 $3.18 $3.43

0.5% 0.5% 0.5% 0.4% 0.4%

80,401,315 81,369,297 83,160,518 87,088,445 86,762,601

13.4% 13.5% 13.8% 14.5% 14.4%

13.5% 13.8% 14.5% 14.4% 14.6%

995,482 1,905,990 4,397,933 (325,844) 2,735,414

27,500 114,769 470,006 1,632,223

27,500 2,216,998 2,102,229 1,632,223 1,632,223

1,664,297 231,750 346,519 789,025 774,756

$3.43 $3.50 $3.46 $3.43 $3.45

NEW SUPPLY CURR SF

U/C

VCY CURR %

PROP TYPE

TOTAL VCY SF

ABSORPTION

763,657 763,657

900,640 900,640

$6.79 $3.85 $3.47 $3.74

$8.16 $3.26 $2.89 $2.96

$4.31 $3.28 $3.03 $3.22

QUARTERLY COMPARISONS AND TOTALS

QUARTERLY COMPARISON AND TOTALS Q1-12 9,593 602,043,235 Q4-11 9,592 602,015,735 Q3-11 9,590 601,900,966 Q2-11 9,588 601,430,960 Q1-11 9,588 601,430,960

12.8% 13.0% 13.3% 14.1% 14.0%

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.

995,482 8,713,493 6,807,503 2,409,570 2,735,414

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 3

MARKET REPORT | Q1 2012 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES

•

Construction activity increased by 1.7 million square feet in the first quarter. Build-to-suits for Mitsubishi and Georgia-Pacific were the reason behind the increase.

•

Home Depot is close to finalizing a build-to-suit in South Atlanta for 1-million square feet. This will be the second major construction project for the I-75 South corridor this year.

SALES ACTIVITY •

Industrial Developments International (IDI) and Pattillo Construction are the only developers close to constructing speculative buildings in the market.

Investment sales volume was $118 million in the first quarter; slightly ahead of sales volume this time last year.

•

The largest transaction in Atlanta this quarter was RREEF’s $52 million portfolio sale to Cabot Industrial Properties.

•

Industrial rents have yet to show any sign of an upwards trend. Atlanta’s average industrial rent decreased to $3.43/sf this quarter.

•

Northwest Atlanta is the only submarket where rents are steadily increasing quarter-to-quarter.

522 offices in 61 countries on 6 continents United States: 147 Canada: 37 Latin America: 19 Asia Pacific: 201 EMEA: 118 •

$1.8 billion in annual revenue

• Over 2.5 billion square feet under

management • Over 12,000 professionals

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

GA Pacific BTS - 490 Westridge Pky

South Atlanta Ind

900,640

Fourth Quarter 2012

Mitsubishi BTS - 1340 Satellite Blvd

Northeast Atlanta Ind

559,407

Fourth Quarter 2012

FedEx BTS - 6271 Atlantic Blvd

Northeast Atlanta Ind

204,250

Third Quarter 2012

Canton GAINESVILLE Cumming

CHEROKEE CO. F FULTON CO. F FORSYTH CO.

Allatona Lake

son

Lake Lanier

NORTH CENTRAL ATLANTA

Woodstock

FO RS FU

Mountain Park

CHEROKEE CO.

Acworth

H YT O LT

OW CO.

CO N . CO .

Alpharetta

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

Rive r

BARTOW CO. CHEROKEE CO.

ersville

Roswell

Duluth

316 CO BB FU LT CO O . N CO .

MARIETTA

Lawrenceville DORAVILLE Norcross

CHAMBLEE SMYRNA

DECATUR Avondale Estates

SNAPFINGER I-20 EAST

att

ho ac

ATLANTA

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.

UNITED STATES: Atlanta Caldwell Zimmerman Executive 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

RESEARCHER: Atlanta Scott Amoson Vice President | 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 520 offices throughout 62 countries worldwide.

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