3Q 2010 | Metro Atlanta Industrial Market Report by Colliers International

Q3 2010 | INDUSTRIAL

ATLANTA

MARKET REPORT

3rd Quarter Positive for Atlanta Industrial, but...

MARKET INDICATORS

VACANCY

Q3 2010

NEXT QTR

—

As yet another sign Atlanta’s industrial market is stabilizing, third quarter figures show the metro area experienced a second consecutive period of positive absorption. Though minimal when compared to the market size as a whole, a net total of 174,000 square feet was absorbed in third quarter. The largest move-ins to occur were Kraft and Dendreon, both of which began occupying their brand new facilities of 980,000 square feet and 200,824 square feet respectively at Majestic Realty’s Airport Center III in South Atlanta; and also Kelly Products which moved into 315,000 square feet of warehouse it purchased back in April. There were also a number of move-outs in the quarter including First Quality relinquishing the remainder of its space in South Atlanta, consolidating to its Macon, Georgia facility and Broder Brothers vacating 376,731 square feet in Northeast Atlanta. Despite the consecutive quarters of positive activity, industrial space absorption in Atlanta remains negative for the year. Though the overall vacancy rate showed little movement between second and third quarter, vacancy is 0.5% higher than this time last year, amounting to 3 million square feet of space added in the past twelve months. Additionally, Atlanta’s industrial vacancy is 3% higher than the national average and ranks highest among the country’s largest industrial markets.

NET ABSORPTION

—

CONSTRUCTION RENTAL RATE

—

CAP RATES

Looking ahead to the end of the year, no significant changes are expected to the dynamics shaping Atlanta’s industrial market. Leasing activity in third quarter was sluggish with the usual summer slowdown aggravated by uncertainty weighing heavily on the economy. The largest lease signed was one which had been floating around the city for well over a year. Phillips Van Heusen signed for 851,000 square feet in South Atlanta at AEW’s Liberty Industrial Park building. The lease doubles the size of the company’s presence in Atlanta and provides adequate space for its expanded business network. Operations begin early next year. Outside of this deal, however, new leasing activity was limited. As a 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 second consecutive quarter of positive absorption with 174,000 SF occupied in third quarter. Year-todate absorption, however, remains negative at (240,500) SF. Industrial vacancy showed little change this quarter staying close to 14% of the market. Delivered space in third quarter was isolated to Kraft’s 980,000 sq. ft. build-to suit.

MARKET REPORT | Q3 2010 | INDUSTRIAL | ATLANTA

Industrial absorption was positive for the second straight quarter. During this time, occupancy increased by 2 million sq. ft.

•

Shallow-bay product saw the greatest drop in vacancy between quarters. Almost 600,000 SF of shallow-bay space was filled in third quarter.

•

The positive activity breaks a string of six consecutive quarters of negative absorption.

•

Occupancy levels increased the most in the Northwest Atlanta and Snapfinger/I-20 East submarkets this quarter.

Despite the occupancy increases over the past two quarters, year-to-date absorption remains negative at (240,500) SF.

•

The vacancy rate is likely to stay put through the end of the year. Expected deliveries in the first quarter of 2011 will drive it up once more before peaking around 14.4%.

Third quarter leasing activity was mostly comprised of renewals and small transactions. The largest lease signed was Phillips Van Heusen for 851,000 SF at 127 Liberty Industrial Pkwy. in South Atlanta.

Q3 2010 | Vacant Space By Type

Q3 2010 | Net Absorption by Submarket 800,000

Leasing Activity-The volume of square

600,000 400,000

WAREHOUSE 63,143,326 SF VCY RATE = 13.6%

SHALLOW-BAY 12,636,064 SF VCY RATE = 16.1%

200,000 0

(200,000)

FLEX 7,689,313 SF VCY RATE = 16.8%

Build-To-Suit-A term describing property that was developed specifically for a certain tenant to occupy. Can be either leased or owned by tenant.

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.

(400,000) (600,000)

Warehouse

Shallow-Bay

Flex

(800,000)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

500 Business Center Dr.

South Atlanta Ind

8/20/2010

$24,150,000

710,451

$34

Fortress Inv. Group

201 King Mill Rd.

South Atlanta Ind

8/20/2010

$19,837,500

570,486

$34.77

Fortress Inv. Group

9103 Riverside Pky.

I-20 West/Fulton Ind

9/15/2010

$16,700,000

593,404

$28.14

Medline

6575 Jimmy Carter Blvd.

Northeast Atlanta Ind

8/9/2010

$7,525,000

197,558

$38.09

Civic Development LLC

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

127 Liberty Industrial Pky.

South Atlanta Ind

Phillips Van Heusen

AEW Capital

851,349

Distribution Lease

596 Bonnie Valentine Way

Northeast Atlanta Ind

Lion Apparel

First Industrial

265,000

Distribution Lease

655 Raco Dr.

Northeast Atlanta Ind

Lund International

Raco

219,000

Warehouse Renewal

7000 Cobb International Blvd

Northwest Atlanta Ind

Recycletronics

Meadows Development

150,724

Warehouse Lease

P. 2

| COLLIERS INTERNATIONAL

NORTHEAST ATLANTA

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’.

•

I-20W | FULTON IND

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’.

Industrial vacancy increased by 825,000 SF from second quarter mostly because absorption did not match the amount of space delivered.

STONE MOUNTAIN

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’.

•

CHATTAHOOCHEE

Warehouse-A type of building

ABSORPTION & LEASING ACTIVITY

CENTRAL ATLANTA

Bulk

VACANCY & AVAILABILITY

NORTH CENTRAL

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

SNAPFINGER | I-20 EAST

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.

NORTHWEST ATLANTA

Absorption (Net)-The net change in

result, fourth quarter absorption will be minimal. Another positive quarter would confirm a stabilized industrial market, however, only modest results are expected due to the fewer deals completed this summer. For the year as a whole, the Atlanta industrial market will likely finish with more space given back than filled, thanks mostly to first quarter’s significant occupancy loss. Vacancy is expected to remain around 14% of the market; average rents are expected to continue dropping; and construction activity will be restricted to two build-to-suits, both of which are scheduled to deliver in the first quarter of 2011. Regardless of the end-of-year outcome, spots of recovery have begun showing up in the Atlanta industrial market. For the first time in three years the outlook is encouraging.

SOUTH ATLANTA

DEFINITIONS

MARKET REPORT | Q3 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 172 Total 279

2,781,220 1,685,174 11,119,529 15,585,923

7.9% 11.6% 8.2% 8.5%

0.2% 0.1%

219,645 196,100 926,147 1,341,892

7.9% 11.6% 8.3% 8.6%

7.8% 12.2% 8.2% 8.6%

(1,532) 9,000 (13,470) (6,002)

10,683 3,710 (53,963) (39,570)

$9.10 $2.82 $3.67 $3.32

CHATTAHOOCHEE IND. Flex 74 Shallow-Bay 23 Warehouse 310 Total 407

2,298,671 826,799 17,236,345 20,361,815

9.8% 11.5% 6.1% 6.8%

0.8% 0.0% 0.0%

225,181 101,514 1,058,352 1,385,047

9.8% 12.3% 6.1% 6.8%

8.3% 6.2% 5.6% 5.9%

(34,311) (50,000) (100,922) (185,233)

(50,947) (23,204) (43,781) (117,932)

$6.25 $4.40 $4.81 $5.21

I-20 W / FULTON IND. Flex 50 Shallow-Bay 216 Warehouse 639 Total 905

2,409,480 13,220,350 75,420,736 91,050,566

12.2% 13.1% 16.4% 15.8%

0.7% 0.4% 0.5%

294,845 1,816,520 12,709,802 14,821,167

12.2% 13.7% 16.9% 16.3%

12.3% 13.5% 16.5% 15.9%

2,100 (30,955) (296,912) (325,767)

(13,758) (95,561) (508,532) (617,851)

$5.99 $2.65 $2.85 $2.87

NORTH CENTRAL ATLANTA IND. 7,141,897 Flex 143 Shallow-Bay 103 4,995,185 Warehouse 226 11,754,088 Total 472 23,891,170

15.6% 10.7% 12.0% 12.8%

0.8% 0.1% 0.4% 0.5%

1,173,693 540,587 1,449,928 3,164,208

16.4% 10.8% 12.3% 13.2%

18.0% 10.8% 12.6% 13.8%

108,590 (882) 33,319 141,027

101,949 32,704 (11,589) 123,064

$8.64 $5.39 $5.14 $6.21

NORTHEAST ATLANTA IND. Flex 401 15,270,951 Shallow-Bay 420 23,211,524 Warehouse 1,281 131,176,683 Total 2,102 169,659,158

21.5% 17.8% 12.6% 14.1%

0.4% 0.1% 0.4% 0.4%

3,353,545 4,172,267 17,069,493 24,595,305

22.0% 18.0% 13.0% 14.5%

20.9% 18.6% 12.5% 14.1%

(167,789) 135,961 (663,234) (695,062)

(555,631) (259,157) (316,836) (1,131,624)

NORTHWEST ATLANTA IND. Flex 178 7,771,710 Shallow-Bay 185 9,330,256 Warehouse 579 40,085,813 Total 942 57,187,779

14.0% 15.8% 13.1% 13.7%

1.6% 0.2% 0.3%

1,215,799 1,473,995 5,316,535 8,006,329

15.6% 15.8% 13.3% 14.0%

17.0% 18.6% 13.8% 15.0%

101,701 257,212 223,823 582,736

103,692 26,530 791,572 921,794

18,750 18,750

$7.69 $4.11 $3.51 $4.01

SNAPFINGER / I-20 EAST IND. Flex 54 1,874,341 Shallow-Bay 91 4,643,458 Warehouse 314 32,173,868 Total 459 38,691,667

5.6% 12.1% 10.6% 10.6%

0.0% 0.0%

104,316 563,388 3,436,381 4,104,085

5.6% 12.1% 10.7% 10.6%

5.8% 13.4% 11.7% 11.6%

4,127 59,990 319,748 383,865

21,329 33,256 1,606,316 1,660,901

1,500,000 1,500,000

$6.48 $3.14 $3.21 $3.26

SOUTH ATLANTA IND. Flex 103 Shallow-Bay 186 Warehouse 904 Total 1,193

3,338,238 13,462,861 128,762,565 145,563,664

11.0% 17.3% 14.8% 14.9%

0.6% 0.5%

365,713 2,327,611 19,813,835 22,507,159

11.0% 17.3% 15.4% 15.5%

8.1% 19.2% 15.1% 15.3%

(96,189) 254,156 434,209 592,176

(78,798) (196,771) (291,608) (567,177)

2,885,732 6,929,422 15,516,326 25,331,480

24.2% 20.7% 7.3% 12.9%

1.3% 0.1% 1.5% 1.1%

736,576 1,444,082 1,362,853 3,543,511

25.5% 20.8% 8.8% 14.0%

27.0% 20.3% 6.7% 12.8%

41,446 (37,820) (317,370) (313,744)

(4,695) (188,909) (278,501) (472,105)

ATLANTA MARKET GRAND TOTAL Flex 1,153 45,772,240 Shallow-Bay 1,416 78,305,029 Warehouse 4,662 463,245,953 Total 7,231 587,323,222

16.2% 16.0% 13.2% 13.8%

0.6% 0.2% 0.4% 0.4%

7,689,313 12,636,064 63,143,326 83,468,703

16.8% 16.1% 13.6% 14.2%

16.7% 16.9% 13.4% 14.1%

(41,857) 596,662 (380,809) 173,996

(466,176) (667,402) 893,078 (240,500)

998,750 998,750

2,699,574 2,699,574

1,632,000 1,632,000

$7.22 $3.65 $3.09 $3.31

0.4% 0.5% 0.5% 0.6% 0.5%

83,468,703 82,643,949 82,799,205 80,528,629 79,219,330

14.2% 14.1% 14.2% 13.8% 13.6%

14.1% 14.2% 13.8% 13.6% 12.5%

173,996 1,856,080 (2,270,576) (1,265,199) (496,065)

(240,500) (414,496) (2,270,576) (5,474,158) (4,208,959)

998,750 1,700,824 44,100 96,000

2,699,574 1,700,824 2,083,187 2,039,087

1,632,000 2,630,750 2,730,000 2,730,000 2,774,100

$3.31 $3.38 $3.42 $3.46 $3.58

STONE MOUNTAIN IND. Flex 89 Shallow-Bay 146 Warehouse 237 Total 472

980,000 980,000

1,180,824 1,180,824

482,000 482,000

1,150,000 1,150,000

$7.54 $4.02 $3.34 $3.64

$7.78 $3.18 $2.77 $2.85

$6.02 $3.63 $3.05 $3.83

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

7,231 7,230 7,228 7,228 7,226

587,323,222 586,324,472 584,623,648 584,623,648 584,579,548

13.8% 13.6% 13.7% 13.2% 13.1%

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 | Q3 2010 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

Construction activity is limited to two build-tosuits. Both of these buildings are scheduled for delivery in the first quarter of 2011.

•

Kraft’s build-to-suit of 980,000 SF in South Atlanta was the largest delivery in the third quarter. The food manufacturer expanded from an existing building of 735,000 SF in Northeast Atlanta.

The average rental rate for industrial space declined for the seventh straight quarter.

•

There was little movement to concessions. Current 5-year deal structures are averaging 4 months free rent and $2/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

SALES ACTIVITY Industrial sales were active in the third quarter, but mostly for users. Medline’s purchase of a 593,407 SF distribution facility for $28/sf was the most recent sale.

•

The continued absence of spec development is important to the overall recovery of Atlanta’s industrial market.

•

$2 billion in annual revenue

• Over 2 billion square feet under

CONSTRUCTION ACTIVITY (100,000 SF+)

management

PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

Oakley Industrial Blvd. - Clorox

South Atlanta

1,150,000

First Quarter 2011

Aldi Foods Distribution Ctr.

Northeast Atlanta

482,000

First Quarter 2011

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.

• Over 15,000 professionals

UNITED STATES: 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

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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