3Q 2011 | Atlanta Industrial | Market Report by Colliers International

Q3 2011 | INDUSTRIAL

ATLANTA

MARKET REPORT

Atlanta Industrial Sees Momentous Growth -- Finally

MARKET INDICATORS Projected

Q3 2011

Q4 2011

VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE

—

CAP RATES

—

Atlanta’s industrial market is on track to finish the year with its largest occupancy gain since 2007. Industrial absorption topped 4 million square feet in the third quarter; the highest quarterly amount in 4.5 years. The year-to-date absorption total for the market has reached almost 6.5 million square feet. This period’s increase in occupied space was the result of expansions and regional consolidations to the Atlanta area; and also some small business growth, as experienced in previous quarters this year. The largest move-in of third quarter was Lowe’s Companies which occupied its 1,337,487 square foot warehouse facility in South Atlanta. This building was purchased by the company in February, then retrofitted to serve its east coast distribution facilities. Other noteworthy move-ins this quarter include SANY America occupying 409,006 square feet in its new build-tosuit in South Atlanta and Corrugated Office Supplies occupying 445,234 square feet in the old Solo Cup facility in the I-20 East submarket. Both of these were expansions into the Atlanta market. As a result of the strong occupancy gains in the quarter, the overall vacancy rate for industrial space in Atlanta dropped 0.6% from second quarter which is the largest quarterly drop in 7 years. Atlanta’s industrial vacancy rate is below 14% for the first time since the second quarter of 2009. Third quarter absorption will be the strongest period of move-in activity for Atlanta’s industrial market in 2011. The final quarter of the year should again see more vacant space occupied; though at a much lower amount than this past quarter. Czarnowski Display Service and CEVA Logistics will be the largest occupiers in fourth quarter, filling almost 1 million square feet total. Both companies are expanding their current industrial space usage in Atlanta. In addition to these, a number of smaller move-ins ranging between 20,000 to 60,000 square feet are expected. This highlights the small business growth in the industrial sector which has remained sound throughout the year. Heading into 2012, however, this could change. Though industrial leasing remains steady, Atlanta is beginning to feel the effects of an 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

18%

30,000,000

$4.00

25,000,000

$3.75

$3.00

$2.75

Square Feet

$3.25

14%

20,000,000

$3.50

15,000,000

10%

10,000,000 6%

5,000,000

$2.50

www.colliers.com/atlanta

2011

2010

2009

2008

2007

2006

2005

2004

(5,000,000)

2003

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.

0 2002

Market AVG

2010 2010

2009 2009

2008 2008

$2.50

(10,000,000)

2% -2%

Absorption

Deliveries

Vacancy %

The highest quarterly absorption in 4.5 years occurred in the third quarter. Over 4 million square feet of industrial space was filled in the past three months bringing year-todate absorption to 6,489,075 SF. The strong quarter brought the overall vacancy rate down to 13.8%. SANY’s build-to-suit of 409,006 SF was the only notable delivery of the quarter.

MARKET REPORT | Q3 2011 | INDUSTRIAL | ATLANTA

VACANCY & AVAILABILITY

•

Atlanta industrial experienced its strongest quarter of absorption since 2007.

•

With third quarter absorption being the highest in years, the absence of spec development activity is allowing existing vacant space to be filled; hence the 0.6% drop in Atlanta’s overall industrial vacancy rate between quarters.

•

Of the 4 million square feet in positive absorption this quarter, 64% of it was in bulk warehouse.

•

Whereas South Atlanta is seeing the larger leasing transactions in the market, Northeast Atlanta is picking up the smaller ones. I-20 West/Fulton Industrial continues to see vacancies increase.

•

Vacancy should drop yet again by year’s end.

If leasing and absorption momentum carry over into 2012, the industrial market in Atlanta could be in the midst of a true recovery.

Q3 2011 | Vacant Space By Type

Q3 2011 | Net Absorption by Submarket

•

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’.

•

Warehouse product is seeing the majority of vacant space filled this year; most notably in South Atlanta where warehouse vacancy has dropped 3% since the beginning of the year.

150,000 0

Leasing Activity-The volume of square

50,000

WAREHOUSE 61,824,374 SF VCY RATE = 13.3%

SHALLOW-BAY 12,288,227 SF VCY RATE = 15.5%

(50,000)

0 (100,000)

(150,000)

FLEX 8,801,626 SF VCY RATE = 15.9%

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.

100,000

(200,000) (250,000) 0

(300,000)

Warehouse

Shallow-Bay

Flex

0) (350,000)

UPDATE Recent Transactions in the Market SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

Horizon Creek Distr. Ctr.

Northeast Atlanta Ind

8/12/2011

$29,000,000

482,896

$60.05

Lincoln Property Co.

600 Hartman Ind. Blvd.

I-20 West/Fulton Ind

7/7/2011

$22,000,000

525,627

$41.86

Welsh Property Trust

1523 Steve Reynolds Blvd.

Northeast Atlanta Ind

9/12/2011

$19,425,000

962,280

$20.19

Brookfied Real Estate

1169 Canton Rd.

Northwest Atlanta Ind

7/27/2011

$17,000,000

266,250

$63.85

Cabot Properties

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

1791 Mt. Zion Rd.

South Atlanta Ind

Louis Dreyfus Commodities

Rubicon Property

515,429

Warehouse Renewal

250 Declaration Dr.

South Atlanta Ind

Georgia-Pacific

Duke Realty

429,600

Warehouse Lease

Majestic Airport Ctr II-Bldg 2

South Atlanta Ind

Round 2 Electronics

Majestic Realty

258,674

Warehouse Lease

Majestic Airport Ctr II-Bldg 5

South Atlanta Ind

LifeScience Logistics

Majestic Realty

255,000

Warehouse Lease

P. 2

| COLLIERS INTERNATIONAL

LANDLORD

SIZE SF

TYPE

I-20W | FULTON IND

Atlanta’s industrial vacancy rate is below 14% for the first time since the second quarter of 2009.

NORTHWEST ATLANTA

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’.

•

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’.

ABSORPTION & LEASING ACTIVITY

STONE MOUNTAIN

Warehouse-A type of building

CENTRAL ATLANTA

Bulk

SNAPFINGER | I-20 EAST

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

CHATTAHOOCHEE

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

uncertain economy. Most of the positive activity this year is the result of transactions completed when the economy was modestly improving. Since then, growth has stalled. As a result, Atlanta’s industrial activity is beginning to flatten. Larger requirements will continue to occur given the city’s regional location, plus the desirability of larger companies, such as Lowe’s, to relocate here and streamline their distribution networks. An anemic economy, however, will cause a slowdown in small business growth, affecting absorption levels. For the time being, the focus of Atlanta’s industrial market will be finishing 2011 with its strongest year in some time. Going forward, too many unforeseen circumstances stand in the way of determining whether or not this year’s absorption activity will carry over and propel the market into a much needed recovery.

SOUTH ATLANTA

DEFINITIONS

MARKET REPORT | Q3 2011 | INDUSTRIAL | ATLANTA

UPDATE

Market Comparisons

VACANCY

PROP TYPE

BLDGS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY %

CENTRAL ATLANTA IND. Flex 90 Shallow-Bay 46 Warehouse 212 Total 348

2,721,153 1,481,923 11,405,102 15,608,178

7.7% 5.8% 8.6% 8.2%

CHATTAHOOCHEE IND. Flex 111 Shallow-Bay 27 Warehouse 362 Total 500

2,722,424 862,949 17,716,369 21,301,742

10.1% 14.8% 7.9% 8.5%

I-20 W / FULTON IND. Flex 95 Shallow-Bay 220 Warehouse 763 Total 1,078

3,016,675 12,822,039 76,204,764 92,043,478

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)

209,193 86,310 979,136 1,274,639

7.7% 5.8% 8.6% 8.2%

8.1% 4.8% 8.9% 8.4%

10,800 (14,810) 35,832 31,822

(53,237) (22,810) 111,718 35,671

$9.51 $2.67 $3.57 $4.23

0.0% 0.0%

275,658 127,740 1,400,971 1,804,369

10.1% 14.8% 7.9% 8.5%

9.4% 14.8% 8.3% 8.7%

(19,266) 0 71,562 52,296

(32,419) (18,000) (144,230) (194,649)

$7.49 $3.85 $4.80 $5.07

14.2% 14.2% 15.2% 15.1%

0.4% 0.3%

428,573 1,816,254 11,889,660 14,134,487

14.2% 14.2% 15.6% 15.4%

14.0% 14.3% 15.4% 15.2%

(5,332) 19,332 (134,874) (120,874)

8,191 17,091 (550,227) (524,945)

$6.70 $2.62 $2.98 $3.01

NORTH CENTRAL ATLANTA IND. 7,979,355 Flex 221 Shallow-Bay 139 5,402,480 Warehouse 345 13,244,689 Total 705 26,626,524

20.9% 8.3% 10.8% 13.3%

0.2% 0.2% 0.2% 0.2%

1,683,394 454,623 1,458,705 3,596,722

21.1% 8.4% 11.0% 13.5%

20.9% 8.6% 11.2% 13.6%

(16,069) 10,179 26,740 20,850

(298,209) 126,037 87,111 (85,061)

NORTHEAST ATLANTA IND. Flex 626 17,969,644 Shallow-Bay 475 23,843,493 Warehouse 1,608 127,898,037 Total 2,709 169,711,174

19.0% 14.3% 13.0% 13.8%

0.6% 0.2% 0.4% 0.4%

3,519,893 3,458,475 17,098,405 24,076,773

19.6% 14.5% 13.4% 14.2%

19.7% 16.1% 13.9% 14.8%

(144,785) 580,567 1,498,073 1,933,855

NORTHWEST ATLANTA IND. Flex 298 9,670,381 Shallow-Bay 216 9,318,633 Warehouse 788 41,616,281 Total 1,302 60,605,295

12.4% 14.9% 14.4% 14.2%

1.4% 0.3% 0.4%

1,329,190 1,391,269 6,128,987 8,849,446

13.7% 14.9% 14.7% 14.6%

13.4% 14.1% 14.7% 14.4%

(29,635) (73,611) 4,053 (99,193)

58,005 187,522 (76,077) 169,450

$9.29 $4.30 $3.60 $3.92

SNAPFINGER / I-20 EAST IND. Flex 119 2,805,370 Shallow-Bay 102 4,683,691 Warehouse 425 35,851,416 Total 646 43,340,477

9.1% 12.6% 9.3% 9.7%

253,895 589,824 3,346,803 4,190,522

9.1% 12.6% 9.3% 9.7%

8.7% 12.9% 11.3% 11.3%

(9,300) 16,262 706,663 713,625

(32,548) (56,794) 639,478 550,136

$4.19 $2.70 $3.10 $3.08

SOUTH ATLANTA IND. Flex 221 Shallow-Bay 228 Warehouse 1,103 Total 1,552

4,948,962 13,868,948 125,921,119 144,739,029

7.5% 21.2% 12.5% 13.1%

387,325 2,946,774 17,747,826 21,081,925

7.8% 21.2% 14.1% 14.6%

8.3% 19.9% 15.8% 15.9%

22,798 (185,405) 2,483,386 2,320,779

24,987 (491,851) 5,005,466 4,538,602

$6.58 $3.19 $2.83 $2.88

3,396,370 7,093,170 16,293,465 26,783,005

21.0% 20.0% 10.9% 14.6%

714,505 1,416,958 1,773,880 3,905,343

21.0% 20.0% 10.9% 14.6%

21.1% 20.5% 10.8% 14.7%

2,246 36,959 (17,054) 22,151

41,873 (14,398) 38,541 66,016

$5.65 $3.54 $3.04 $3.52

ATLANTA MARKET GRAND TOTAL Flex 1,915 55,230,334 Shallow-Bay 1,619 79,377,326 Warehouse 5,919 466,151,242 Total 9,453 600,758,902

15.5% 15.4% 12.6% 13.2%

0.5% 0.1% 0.6% 0.6%

8,801,626 12,288,227 61,824,373 82,914,226

15.9% 15.5% 13.3% 13.8%

15.9% 15.7% 14.0% 14.4%

(21,795) 187,105 3,845,797 4,011,107

(428,142) 307,364 6,609,853 6,489,075

470,006 470,006

2,102,229 2,102,229

304,750 304,750

$7.29 $3.60 $3.20 $3.46

0.6% 0.4% 0.5% 0.5% 0.5%

82,914,226 86,455,327 86,303,960 87,301,072 88,851,836

13.8% 14.4% 14.4% 14.6% 14.8%

14.4% 14.4% 14.6% 14.8% 14.7%

4,011,107 (151,367) 2,629,335 1,550,764 315,148

6,489,075 2,477,968 2,629,335 1,102,158 (448,606)

470,006 1,632,223 1,131,153

2,102,229 1,632,223 1,632,223 2,794,918 2,794,918

304,750 774,756 774,756 2,102,229 2,041,229

$3.46 $3.43 $3.44 $3.46 $3.46

STONE MOUNTAIN IND. Flex 134 Shallow-Bay 166 Warehouse 313 Total 613

TOTAL VCY SF

ABSORPTION

0.3% 0.1% 1.6% 1.4%

21,963 378,199 669,489 1,069,651

470,006 470,006

482,223 482,223

1,620,006 1,620,006

100,500 100,500

$8.66 $6.46 $4.75 $6.40

204,250 204,250

$7.38 $3.92 $3.53 $3.70

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

9,453 9,451 9,451 9,449 9,449

600,758,902 600,288,896 600,288,896 598,656,673 598,656,673

13.2% 14.0% 13.9% 14.1% 14.3%

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 | Q3 2011 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

SANY America’s 409,006 SF distribution facility in South Atlanta was the only major delivery in the third quarter.

•

Average asking rates for industrial space showed a slight uptick in third quarter. This is the first increase to occur in three years.

•

FedEx’s build-to-suit and T5’s new data center are the only major industrial projects being built in Atlanta. Mitsubishi Electric recently announced plans of a Northeast Atlanta expansion which could go under construction soon.

•

It is still to early to tell if rental rates are on the upswing. Effective rental rates still remain low and uncertainty in the economy clouds things.

United States: 125 Canada: 38 Latin America: 18 Asia Pacific: 214 EMEA: 117

SALES ACTIVITY Third quarter showed the strongest period of investment activity in the year so far. Over $121 million of investment volume occurred.

•

Build-to-suits continue to dominate the development horizon; though rumor of spec construction has returned to the market.

•

512 offices in 61 countries on 6 continents

•

$1.5 billion in annual revenue

• Over 2.2 billion square feet under

management

CONSTRUCTION ACTIVITY (100,000 SF+) PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

FedEx BTS - 6271 Atlantic Blvd.

Northeast Atlanta Ind

204,250

Third Quarter 2012

3200 Webb Bridge Rd.

North Central Atlanta Ind

100,500

Fourth 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 13,000 professionals

UNITED STATES: 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

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 512 offices throughout more than 61 countries worldwide.

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