2Q 2010 | Metro Atlanta Industrial Market Report by Colliers International

Q2 2010 | INDUSTRIAL

ATLANTA

MARKET REPORT

Atlanta Industrial Turns Positive in 2Q

MARKET INDICATORS Q2 2010

NEXT QTR

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VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE

—

CAP RATES

For the first time in a year and a half, Atlanta’s industrial market experienced a positive quarter of absorption. Occupancy increased by just over 2.7 million square feet in second quarter making it the strongest period of industrial space absorbed since the first quarter of 2007. A significant portion of the positive absorption this quarter (56%) can be attributed to General Mills moving into its 1.5 million square feet distribution facility east of the city. The build-to-suit has been under construction for the past year in the outer reaches of the metropolitan area. It is the largest industrial building to be delivered since Whirlpool’s 1.5 million square feet build-to-suit in South Atlanta which came onto the market in 2008. The new facility raises I-20 East’s profile and demonstrates the submarket’s ability to compete directly with metro Atlanta’s larger and more attractive industrial submarkets. Elsewhere, move-ins by Safelite (357,500 SF), Systemax (459,134 SF) and Viega (255,070 SF) helped contribute to the remaining 1.2 million square feet of industrial space absorbed in the quarter. As a result of the positive absorption, the industrial vacancy rate moved down slightly to 13.7%. This marks the first time in three years vacant industrial space declined from the previous quarter. Despite the milestone, vacancy in Atlanta is still up 0.4% from this time last year; representing 2.5 million square feet of space. The quarter’s positive industrial absorption is a much welcomed reprieve from the high occupancy losses endured over the past six quarters in Atlanta. It is also the first sign the industrial market may be stabilizing. In any case, the second quarter will likely be the strongest of the year for Atlanta’s industrial market. Heading into third quarter, positive absorption is anticipated; however, at a more modest amount. Industrial leasing has been mixed over the past three months. At the beginning of second quarter, deal activity was fairly strong compared to the beginning of the year. Towards the end of the 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%

20,000,000

14%

$4.00

$3.75

15,000,000

6% 5,000,000 2010

2009

2008

2007

2006

(10,000,000)

-2% -6%

Absorption

www.colliers.com/atlanta

2005

2010 2010

2008 2008

2007 2007

2009 2009

Warehouse

(5,000,000)

2004

$2.50

Market AVG

0 2003

$2.75

10,000,000

2002

$3.00

Square Feet

$3.25

10%

2001

$3.50

Deliveries

Vacancy %

The Atlanta industrial market posted its strongest quarterly absorption since the first quarter of 2007. Yearto-date absorption now totals 690,584 SF. Industrial vacancy showed a slight decline from first quarter but still remains close to 14% of the market. Second quarter delivered space consisted mostly of General Mills’ 1.5 million sq. ft. build-to suit.

MARKET REPORT | Q2 2010 | INDUSTRIAL | ATLANTA

Atlanta’s industrial vacancy rate dropped for the first time in three years. Almost one million square feet of vacant space was filled in second quarter.

•

Second quarter absorption was the strongest period of industrial absorption since the first quarter of 2007. General Mills accounted for 1.5 million sq. ft. of the 2.7 million sq. ft. absorbed.

•

The Northeast and Northwest Atlanta industrial submarkets saw vacancy drop by the largest percentages in second quarter. Respectively, vacancy rates are down 0.6% and 0.8% in these areas, which totals 1.4 million sq. ft. of increased occupancy this quarter.

•

Warehouse/Distribution was the only product type to have positive absorption in second quarter; over 3 million square feet filled.

•

Systemax was the largest lease signed in second quarter at 459,134 SF. Smaller transactions ranging from 100,000 to 200,000 SF are the most active deals currently in the market.

•

Looking ahead, industrial absorption is anticipated to be positive in third quarter, albeit minimally.

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’.

Although industrial vacancy in Atlanta is improving, the market remains saturated with almost 80 million sq. ft. of available space. Q2 2010 | Vacant Space By Type

Q2 2010 | Net Absorption by Submarket 1,600,000 0

Leasing Activity-The volume of square

0 1,400,000

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.

0 1,200,000

WAREHOUSE 59,928,126 SF VCY RATE = 13.1%

0 1,000,000

SHALLOW-BAY 12,377,838 SF VCY RATE = 15.8%

FLEX 7,685,346 SF VCY RATE = 16.7%

Build-To-Suit-A term describing property that

0 800,000 0 600,000 0 400,000 0 200,000 0 0

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

I-20W | FULTON IND

•

Flex-A type of building designed to be

STONE MOUNTAIN

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’.

CHATTAHOOCHEE

Shallow-Bay Distribution-A type of building

NORTH CENTRAL

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’.

•

SOUTH ATLANTA

Warehouse-A type of building

ABSORPTION & LEASING ACTIVITY

NORTHWEST ATLANTA

Bulk

VACANCY & AVAILABILITY

CENTRAL ATLANTA

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

NORTHEAST 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.

SNAPFINGER | I-20 EAST

Absorption (Net)-The net change in

quarter, however, leasing took a bit of a break. Nevertheless, a significant amount of industrial space demand remains in the market. This demand comes from businesses associated with auto suppliers, food processing, logistics, consumer products and alternative energy. Two of the largest industrial requirements in the market include Lowe’s (1.5 million sq. ft.) and Phillips Van Heusen (800,000 SF), both of which continue to search for deals to accommodate their space needs. As demand converts into leasing activity, the Atlanta industrial market will begin to see its vacancy decline more progressively. Given the fragile state of the national and local economies though, recovery is still a long ways out; meaning vacant industrial space in Atlanta will remain abundant for some time.

Square Feet

DEFINITIONS

0) (200,000)

Warehouse

Shallow-Bay

Flex

0) (400,000)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

1090 Broadway Ave.

Northeast Atlanta Ind

4/8/2010

$35,000,000

807,990

$43.32

High Street Equity Adv.

Roswell DC-Bldgs. A & B

North Central Atlanta Ind

6/4/2010

$13,650,000

260,000

$52.50

Cobalt Industrial REIT

SouthPoint Bldg. B

South Atlanta Ind

6/2/2010

$9,500,000

297,000

$31.99

Cabot Properties

Buford Hwy. Distr. Ctr.

Northeast Atlanta Ind

5/27/2010

$4,050,000

96,160

$42.12

Cabot Properties

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

Jefferson Mill Bus. Park-A

Northeast Atlanta Ind

Systemax

Weeks Robinson

459,134

Warehouse Lease

Newpoint DC-Bldg. 3

Northeast Atlanta Ind

Kia Motors

Pannattoni

451,200

Warehouse Renewal

1039 Northpoint Drive

Northwest Atlanta Ind

JVC

MDH Partners

210,778

Warehouse Lease

100 Constitution Drive

South Atlanta Ind

IFCO

Hollingsworth Capital

192,000

Distribution Lease

P. 2

| COLLIERS INTERNATIONAL

MARKET REPORT | Q2 2010 | INDUSTRIAL | ATLANTA

UPDATE

Market Comparisons

VACANCY

PROP TYPE

BLDGS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY %

SUB VCY %

TOTAL VCY SF

ABSORPTION 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)

CENTRAL ATLANTA IND. Flex 61 Shallow-Bay 46 Warehouse 173 Total 280

2,781,220 1,685,174 11,152,529 15,618,923

7.8% 12.2% 8.2% 8.6%

0.2% 0.1%

218,113 205,100 936,913 1,360,126

7.8% 12.2% 8.4% 8.7%

8.6% 14.4% 8.3% 9.0%

19,772 38,210 (14,178) 43,804

12,215 (5,290) (55,651) (48,726)

$9.54 $4.01 $2.78 $3.32

CHATTAHOOCHEE IND. Flex 74 Shallow-Bay 24 Warehouse 315 Total 413

2,433,553 850,799 17,401,148 20,685,500

7.8% 5.3% 5.6% 5.8%

0.8% 0.0%

190,870 51,514 971,955 1,214,339

7.8% 6.1% 5.6% 5.9%

9.3% 6.1% 5.4% 5.9%

35,344 (31,223) 4,121

(16,636) 26,796 17,141 27,301

$6.42 $4.60 $5.11 $5.21

I-20 W / FULTON IND. Flex 51 Shallow-Bay 217 Warehouse 635 Total 903

2,429,012 13,270,225 74,719,713 90,418,950

12.2% 12.4% 16.0% 15.4%

0.7% 0.6% 0.6%

296,945 1,739,002 12,372,191 14,408,138

12.2% 13.1% 16.6% 15.9%

11.8% 12.7% 16.3% 15.7%

(10,000) (48,091) (164,108) (222,199)

(15,858) (33,214) (276,920) (325,992)

$5.99 $2.67 $2.84 $2.87

NORTH CENTRAL ATLANTA IND. Flex 144 7,367,163 Shallow-Bay 102 4,998,485 Warehouse 223 11,530,212 Total 469 23,895,860

17.1% 11.7% 10.7% 12.9%

0.8% 0.1% 1.6% 1.0%

1,318,475 590,105 1,412,962 3,321,542

17.9% 11.8% 12.3% 13.9%

17.6% 13.6% 11.8% 14.0%

(24,725) 89,756 (50,233) 14,798

24,000 (36,814) (24,523) (37,337)

$8.65 $5.69 $4.89 $6.21

NORTHEAST ATLANTA IND. Flex 402 15,298,737 Shallow-Bay 424 23,337,275 Warehouse 1,299 132,222,938 Total 2,125 170,858,950

20.3% 18.3% 11.7% 13.4%

0.3% 0.1% 0.2% 0.2%

3,155,597 4,293,346 15,865,308 23,314,251

20.6% 18.4% 12.0% 13.6%

19.1% 18.2% 12.9% 14.2%

(237,473) (51,049) 1,205,657 917,135

(313,074) (402,688) 213,699 (502,063)

482,000 482,000

$7.92 $4.16 $3.36 $3.64

NORTHWEST ATLANTA IND. Flex 179 7,801,880 Shallow-Bay 187 9,392,688 Warehouse 574 39,940,361 Total 940 57,134,929

15.7% 13.9% 12.9% 13.5%

1.5% 0.4% 0.3% 0.5%

1,344,777 1,350,900 5,294,659 7,990,336

17.2% 14.4% 13.3% 14.0%

17.3% 14.5% 14.4% 14.8%

2,333 8,191 453,591 464,115

15,522 (219,874) 646,653 442,301

18,750 18,750

$7.44 $4.13 $3.70 $4.01

SNAPFINGER / I-20 EAST IND. Flex 54 1,889,341 Shallow-Bay 88 4,519,711 Warehouse 290 29,486,548 Total 432 35,895,600

4.6% 13.8% 10.5% 10.6%

1.7% 0.1% 0.1%

120,645 623,378 3,122,463 3,866,486

6.4% 13.8% 10.6% 10.8%

6.4% 13.4% 11.4% 11.4%

(18,590) 1,578,719 1,560,129

5,000 (26,734) 1,661,319 1,639,585

1,500,000 1,500,000

$6.43 $2.66 $3.28 $3.26

SOUTH ATLANTA IND. Flex 100 Shallow-Bay 188 Warehouse 884 Total 1,172

3,214,791 13,553,881 125,539,722 142,308,394

8.1% 15.6% 14.2% 14.2%

0.8% 0.7%

261,902 2,118,231 18,931,367 21,311,500

8.1% 15.6% 15.1% 15.0%

8.0% 14.9% 15.1% 14.9%

(4,447) (96,401) 134,155 33,307

10,950 124,081 (425,780) (290,749)

200,000 200,000

2,885,732 6,902,462 16,163,026 25,951,220

25.6% 20.3% 6.2% 12.1%

1.3% 0.1% 0.1% 0.2%

778,022 1,406,262 1,020,308 3,204,592

27.0% 20.4% 6.3% 12.3%

24.9% 20.4% 5.8% 11.8%

(58,975) (972) (88,258) (148,205)

(46,141) (151,089) (16,506) (213,736)

ATLANTA MARKET GRAND TOTAL Flex 1,154 46,101,429 Shallow-Bay 1,421 78,510,700 Warehouse 4,633 458,156,197 Total 7,208 582,768,326

16.0% 15.5% 12.6% 13.3%

0.7% 0.2% 0.5% 0.5%

7,685,346 12,377,838 59,928,126 79,991,310

16.7% 15.8% 13.1% 13.7%

16.1% 15.7% 13.4% 13.9%

(278,171) (78,946) 3,024,122 2,667,005

(324,022) (724,826) 1,739,432 690,584

1,700,000 1,700,000

2,640,750 2,640,750

$7.22 $3.75 $3.14 $3.38

0.5% 0.5% 0.5% 0.4% 0.5%

79,991,310 80,958,315 78,981,894 77,720,787 77,468,859

13.7% 13.9% 13.6% 13.4% 13.3%

13.9% 13.6% 13.4% 13.3% 12.5%

2,667,005 (1,976,421) (1,217,007) (155,928) (2,524,794)

690,584 (1,976,421) (4,735,275) (3,518,268) (3,362,340)

1,700,000 44,100 96,000 75,680

1,700,000 1,761,323 1,717,223 1,621,223

2,640,750 2,840,000 2,840,000 2,724,100 1,640,100

$3.38 $3.42 $3.46 $3.58 $3.62

STONE MOUNTAIN IND. Flex 89 Shallow-Bay 145 Warehouse 240 Total 474

2,140,000 2,140,000

$8.46 $3.31 $2.81 $2.85

$6.47 $3.64 $3.20 $3.83

QUARTERLY COMPARISONS AND TOTALS QUARTERLY COMPARISON AND TOTALS Q2-10 Q1-10 Q4-09 Q3-09 Q2-09

7,208 7,206 7,206 7,204 7,201

582,768,326 581,068,326 581,068,326 581,024,226 580,928,226

13.3% 13.5% 13.1% 12.9% 12.8%

NOTE: STATISTICAL SET INCLUDES ALL INDUSTRIAL PROPERTIES 15,000 SF AND UP. 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 | Q2 2010 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

All of the industrial properties currently under construction in Atlanta are build-to-suits. The market is likely to see a few more come online before year’s end.

•

General Mills’ 1.5 million sq. ft. distribution facility in Social Circle is the largest industrial delivery since Whirlpool’s build-to-suit in 2008.

There was no significant movement on quoted rates between quarters. Rental rates are still down 7% from mid-year 2009 though.

•

Current 5-year deal structures are averaging 4 months free rent and $3/sf in TI allowance.

480 offices in 61 countries on 6 continents United States: 135 Canada: 39 Latin America: 17 Asia Pacific: 194 EMEA: 95

INVESTMENT ACTIVITY Atlanta industrial investment is up 109% from first quarter. Compared to this time last year, however, dollar volume sold is almost identical.

•

On the whole, industrial construction remains in check. Upfront costs to build, along with mediocre demand have sidelined speculative developments.

•

$2 billion in annual revenue

• Over 2 billion square feet under

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

management

SUBMARKET

SIZE (SF)

DELIVERY DATE

• Over 15,000 professionals

Oakley Industrial Blvd. - Clorox

South Atlanta

1,100,000

First Quarter 2011

Majestic Airport Ctr. 3 - Kraft

South Atlanta

980,000

Third Quarter 2010

UNITED STATES:

Aldi Foods Distribution Ctr.

Northeast Atlanta

482,000

First Quarter 2011

Majestic Airport Ctr. 3 - Dendreon

South Atlanta

160,000

Third Quarter 2010

Atlanta Mike Spears SIOR Senior VP | Colliers Manager 1349 West Peachtree Street Suite 1100 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 1349 West Peachtree Street Suite 1100 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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