4Q 2010 | Atlanta Industrial | Market Report by Colliers International

YEAR-END 2010 | INDUSTRIAL

ATLANTA

MARKET REPORT

4th Quarter Pushes Atlanta Industrial Positive for Year

MARKET INDICATORS Q4 2010

NEXT QTR

VACANCY NET ABSORPTION CONSTRUCTION

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RENTAL RATE

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— —

CAP RATES

After two years of occupancy losses, Atlanta’s industrial market finished 2010 with a net gain of 919,129 square feet. Fourth quarter’s increase in occupied space was instrumental to the market finishing the year positive. Move-ins by Medline and Boles Part Supply helped contribute to absorption in the quarter. Medline expanded into 593,404 square feet in I-20 West/Fulton Industrial, while Boles Part Supply moved into a 522,300 square foot building it purchased earlier in the year. Additionally, move-ins from tenants ranging between 70,000 to 110,000 square feet were also abundant. Atlanta’s industrial vacancy rate decreased quarter-to-quarter for the first time in three years as a result of the positive activity. Compared to this time last year, however, overall vacancy is still up 0.4%, or 1.8 million square feet. Nevertheless, 2010 proved to be a transitional year for the industrial market in Atlanta as the region is slowly moving away from record vacancy. The year’s most notable highlights include General Mills moving into their 1.5 million square foot distribution center east of the city; Kraft moving into its 980,000 square feet build-to-suit in South Atlanta; and Phillips Van Heusen doubling the size of its Atlanta presence by signing for a 851,349 square feet distribution center in South Atlanta. Local economists are predicting a slow and steady road to recovery for Atlanta’s economy. The same came be said for the metro area’s industrial market. The buzz is more positive and upbeat than it has been in years. Heading into 2011, Atlanta is expected to continue seeing activity from companies looking to consolidate their regional industrial operations to the area. In addition, industrial expansions are slowly creeping back into the market. Consumer products and logistics companies will likely be the most active in 2011. Though leasing activity and demand remain moderate, a number of large requirements exist and are close to being finalized. It was recently reported that Lowe’s is close to making a decision on a new distribution center either in South Atlanta or Northeast Atlanta, while FedEx 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

2009 2009

2008 2008

2007 2007

2010 2010

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 finished the year with positive absorption of 919,129 SF. Fourth quarter’s occupancy increase helped push the year-to-date total into positive territory. Q u a r t e r- t o - q u a r t e r , industrial vacancy decreased for the first time in three years; however, the rate still increased from 2009. Delivered space in 2010 was tied to build-to-suit projects only.

MARKET REPORT | YEAR-END 2010 | INDUSTRIAL | ATLANTA

•

All product type vacancy increased from 2009. Both shallow-bay and warehouse vacancy are up 0.7%. This represents over 1.4 million sq. ft. of vacant space added in the past twelve months between these two product types. Currently, there are 285 existing spaces 100,000 SF and greater available in the Atlanta industrial market. This number decreases greatly to 6 when looking at spaces larger than 800,000 SF.

YEAR-END 2010 | Vacant Space By Type

Fourth quarter absorption totaled 924,298 SF. This is the third consecutive quarter of positive absorption for Atlanta’s industrial market.

•

2010’s largest industrial tenants to take occupancy were: General Mills (1.5 million sq. ft.), Kraft (980,000 SF), Colgate Palmolive (744,331 SF) and Medline (593,404 SF).

•

Despite the positive year, Atlanta’s largest industrial submarkets were hit hardest by occupancy losses. Combined, Northeast Atlanta and South Atlanta had 1.3 million sq. ft. given back in 2010.

•

Leasing activity remains steady heading into 2011. Tenants between 100,000 SF and 300,000 SF are the most active. YEAR-END 2010 | Net Absorption by Submarket 800,0000

Leasing Activity-The volume of square

600,000

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.

400,000 0

SHALLOW-BAY 12,266,471 SF VCY RATE = 15.7%

200,000 00

(200,000)

FLEX 7,701,466 SF VCY RATE = 16.5%

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

WAREHOUSE 62,407,716 SF VCY RATE = 13.5%

SOUTH ATLANTA

•

NORTHEAST ATLANTA

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’.

Atlanta industrial ended the year with a vacancy rate of 14%. This is down 0.2% from third quarter and represents the first quarterly decline in three years.

STONE MOUNTAIN

Flex-A type of building designed to be

•

CENTRAL 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’.

ABSORPTION & LEASING ACTIVITY

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’.

VACANCY & AVAILABILITY

NORTH CENTRAL

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

NORTHWEST 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.

I-20W | FULTON IND

Absorption (Net)-The net change in

was looking to build a new distribution center in Northeast Atlanta with the potential to expand it into a major southeast hub in the future. Atlanta should finish the year with more vacancy taken off the market yet again, thanks to higher absorption levels and no new development. The region still has a long road ahead to fill the 6.7 million square feet given back by tenants during 2008 and 2009. Momentum has finally shifted, however, and Atlanta’s industrial market appears headed for a year of recovery.

SNAPFINGER | I-20 EAST

DEFINITIONS

(400,000) 0)

(600,000)

Warehouse

Shallow-Bay

Flex

(800,000)0)

UPDATE Largest Transactions in the Market for 2010 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 Advisors

500 Business Center Dr.

South Atlanta Ind

6/25/2010

$24,184,900

709,173

$34.10

FGT Holdings

Atlanta Tradeport Portfolio

South Atlanta Ind

12/13/2010

$21,550,000

301,709

$71.43

TA Associates Realty

201 King Mill Ct.

South Atlanta Ind

6/25/2010

$19,837,500

570,586

$34.77

FGT Holdings

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

1595 Oakley Industrial Blvd.

South Atlanta Ind

Clorox

IDI

1,150,000

Build-To-Suit

127 Liberty Industrial Blvd.

South Atlanta Ind

Phillips Van Heusen

AEW Capital

851,349

Distribution Lease

125 Horizon Dr.

Northeast Atlanta Ind

United Stationers

Allianz Life Insurance

600,000

Distribution Renewal

Dry Pond Rd.

Northeast Atlanta Ind

Aldi

AM King Construction (Dev)

482,000

Build-To-Suit To Own

P. 2

| COLLIERS INTERNATIONAL

MARKET REPORT | YEAR-END 2010 | INDUSTRIAL | ATLANTA

UPDATE

Market Comparisons

VACANCY

PROP TYPE

BLDGS

EXISTING PROPERTIES TOTAL SF

DIRECT VCY %

SUB VCY %

TOTAL VCY SF

ABSORPTION NET ABSORP YTD SF

DELIVERIES NEW SUPPLY CURR SF

U/C

NEW SUPPLY YTD SF

RENT

VCY CURR %

VCY PRIOR %

NET ABSORP CURR SF

UNDER AVG CONSTR RENT SF (NNN)

196,020 182,500 843,824 1,222,344

7.0% 10.8% 7.6% 7.8%

7.9% 11.6% 8.2% 8.5%

23,625 13,600 63,121 100,346

34,308 17,310 9,158 60,776

$9.28 $2.42 $3.67 $4.05

CENTRAL ATLANTA IND. Flex 61 Shallow-Bay 46 Warehouse 171 Total 278

2,780,720 1,685,174 11,113,455 15,579,349

7.0% 10.8% 7.6% 7.8%

CHATTAHOOCHEE IND. Flex 76 Shallow-Bay 23 Warehouse 309 Total 408

2,374,376 826,799 17,175,750 20,376,925

11.2% 12.3% 6.8% 7.5%

0.8% 0.1% 0.1%

265,326 108,158 1,179,477 1,552,961

11.2% 13.1% 6.9% 7.6%

10.4% 12.3% 6.8% 7.4%

(17,877) (6,644) (15,625) (40,146)

(81,273) (29,848) (164,906) (276,027)

$6.07 $4.00 $4.82 $4.82

I-20 W / FULTON IND. Flex 49 Shallow-Bay 214 Warehouse 640 Total 903

2,389,480 13,084,232 75,783,210 91,256,922

12.0% 13.7% 14.7% 14.5%

0.7% 0.5% 0.5%

286,740 1,888,126 11,475,825 13,650,691

12.0% 14.4% 15.1% 15.0%

12.3% 13.9% 16.5% 16.1%

8,105 (67,191) 1,060,104 1,001,018

(5,653) (135,973) 846,392 704,766

$5.96 $2.70 $2.81 $2.84

NORTH CENTRAL ATLANTA IND. Flex 146 7,391,083 4,992,637 Shallow-Bay 103 Warehouse 228 11,917,088 Total 477 24,300,808

16.0% 11.4% 11.7% 13.0%

0.6% 0.1% 0.2% 0.3%

1,230,734 573,938 1,419,721 3,224,393

16.7% 11.5% 11.9% 13.3%

16.7% 10.7% 12.2% 13.3%

3,617 (41,645) 36,950 (1,078)

105,566 (647) 22,218 127,137

$8.78 $5.91 $4.65 $6.28

NORTHEAST ATLANTA IND. Flex 405 15,395,049 Shallow-Bay 420 23,348,934 Warehouse 1,283 131,033,681 Total 2,108 169,777,664

20.7% 17.2% 12.6% 14.0%

0.5% 0.1% 0.5% 0.5%

3,270,310 4,046,272 17,223,356 24,539,938

21.2% 17.3% 13.1% 14.5%

22.0% 18.2% 13.5% 14.9%

110,469 192,665 417,186 720,320

(430,569) (120,310) (142,588) (693,467)

NORTHWEST ATLANTA IND. Flex 185 8,078,742 Shallow-Bay 177 9,024,409 Warehouse 580 40,315,076 Total 942 57,418,227

14.1% 14.8% 13.1% 13.5%

1.6% 0.2% 0.3%

1,263,369 1,335,746 5,356,690 7,955,805

15.6% 14.8% 13.3% 13.9%

15.1% 13.2% 13.1% 13.4%

(46,722) (141,886) (64,745) (253,353)

55,612 (116,021) 649,742 589,333

18,750 18,750

$7.65 $4.06 $3.61 $3.93

SNAPFINGER / I-20 EAST IND. Flex 55 1,905,712 91 4,556,827 Shallow-Bay Warehouse 312 32,126,447 Total 458 38,588,986

7.4% 11.8% 10.7% 10.6%

0.1% 0.0%

140,487 536,504 3,447,273 4,124,264

7.4% 11.8% 10.7% 10.7%

7.1% 12.2% 10.7% 10.7%

(4,800) 17,834 (12,892) 142

1,508,765 1,508,765

$6.57 $3.32 $3.23 $3.31

SOUTH ATLANTA IND. Flex 107 Shallow-Bay 186 Warehouse 911 Total 1,204

3,423,339 13,640,341 128,658,392 145,722,072

10.3% 15.6% 15.2% 15.1%

0.4% 0.4%

352,470 2,128,169 20,019,093 22,499,732

10.3% 15.6% 15.6% 15.4%

10.9% 15.5% 15.1% 15.0%

22,043 (19,818) (627,010) (624,785)

(54,355) 2,671 (592,871) (644,555)

1,180,824 1,180,824

2,885,732 6,901,621 15,489,326 25,276,679

22.8% 21.2% 9.3% 14.1%

1.3% 0.1% 0.2%

696,010 1,467,058 1,442,457 3,605,525

24.1% 21.3% 9.3% 14.3%

25.5% 21.1% 9.2% 14.4%

40,566 (7,874) (10,858) 21,834

35,871 (211,885) (453,678) (629,692)

ATLANTA MARKET GRAND TOTAL Flex 1,173 46,624,233 Shallow-Bay 1,405 78,060,974 Warehouse 4,670 463,612,425 Total 7,248 588,297,632

15.9% 15.5% 13.1% 13.6%

0.6% 0.2% 0.4% 0.4%

7,701,466 12,266,471 62,407,716 82,375,653

16.5% 15.7% 13.5% 14.0%

16.8% 15.6% 13.6% 14.2%

139,026 (60,959) 846,231 924,298

(323,964) (534,563) 1,777,656 919,129

0.4% 0.4% 0.5% 0.5% 0.6%

82,375,653 83,299,951 83,501,952 82,727,429 80,586,443

14.0% 14.2% 14.2% 14.1% 13.8%

14.2% 14.2% 14.1% 13.8% 13.5%

924,298 1,200,751 935,066 (2,140,986) (1,315,316)

919,129 (5,169) (1,205,920) (2,140,986) (5,540,994)

STONE MOUNTAIN IND. Flex 89 Shallow-Bay 145 Warehouse 236 Total 470

16,529 60,140 1,604,189 1,680,858

482,000 482,000

1,150,000 1,150,000

$7.79 $3.97 $3.36 $3.62

$8.10 $3.12 $2.76 $2.80

$5.98 $3.61 $2.99 $3.50

2,708,339 2,708,339

1,632,000 1,632,000

$7.29 $3.68 $3.08 $3.31

2,708,339 2,708,339 1,709,589 2,083,187

1,632,000 1,632,000 998,750 2,708,339 2,708,339

$3.31 $3.31 $3.38 $3.42 $3.46

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

7,248 7,248 7,247 7,245 7,245

588,297,632 588,297,632 587,298,882 585,589,293 585,589,293

13.6% 13.8% 13.7% 13.6% 13.2%

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.

998,750 1,709,589 44,100

SOURCE: COSTAR PROPERTY, COLLIERS RESEARCH

COLLIERS INTERNATIONAL |

P. 3

MARKET REPORT | YEAR-END 2010 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

No new construction began in the fourth quarter. Activity remains only in two build-tosuits for Aldi and Clorox.

•

Following seven consecutive quarters of decline, Atlanta’s average industrial rental rate showed no change from third quarter.

•

The year’s largest deliveries were Kraft’s buildto-suit in South Atlanta and General Mills distribution center in I-20 East.

•

The downward trend for rental rates has slowed in the past few quarters. Industrial market rents in Atlanta appear to be bottoming.

•

Development activity is expected to remain absent in the near future. Though spec developers are itching to begin projects, new construction will be limited to build-to-suits.

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

SALES ACTIVITY The were a handful of investment transactions in 2010; however, user sales accounted for 43% of total sales volume in the year.

•

$2 billion in annual revenue

• Over 2 billion square feet under

management

2010 DELIVERIES (100,000 SF+)

• Over 15,000 professionals

PROPERTY ADDRESS

SUBMARKET

SIZE (SF)

DELIVERY DATE

General Mills Distr. Ctr.

Snapfinger/I-20 East

1,508,765

Second Quarter 2010

6710 Oakley Industrial Blvd.-Bldg 5

South Atlanta

980,000

Third Quarter 2010

UNITED STATES:

6730 Oakley Industrial Blvd.

South Atlanta

200,824

Second 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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