4Q 2011 | Atlanta Industrial | Market Report by Colliers International

YEAR-END 2011 | INDUSTRIAL

ATLANTA

MARKET REPORT

Atlanta Industrial Experiences Best Year Since 2007

MARKET INDICATORS Projected

Q4 2011

Q1 2012

VACANCY

For the second consecutive year, tenants in Atlanta’s industrial market occupied more space than vacated. Over 9 million square feet of industrial space was absorbed in 2011. This is the highest amount of occupancy gain since before the Great Recession. Almost 70% of the space absorbed this year occurred in the last six months. During this time, expansions and regional consolidations by large corporations, along with the return of small business growth filled over 5.6 million square feet of vacant space in the Atlanta market. As a result, the overall industrial vacancy rate in Atlanta dropped to 13.6%; down from 14.8% at the end of 2010. In conjunction with strong absorption levels, the absence of new spec development factored into the decrease in vacancy. The year was highlighted by the first quarter move of Clorox into its new 1.2 million square foot distribution facility in South Atlanta. Aldi’s move into a new 482,223 SF distribution facility and SANY America’s occupation of a new 409,600 SF facility were also significant build-to-suit developments delivering this year. Relocations and expansions by consumer product and manufacturing corporations from both inside and outside the Atlanta market were also important contributors to the positive activity in 2011. Transactions such as these exemplify Atlanta as a regional leader in attracting corporations looking to streamline their distribution networks. Examples of companies which relocated to the area or expanded their Atlanta operations this year include Lowe’s, Electrolux, Phillips Van Heusen, Home Depot and Corrugated Office Supplies.

NET ABSORPTION CONSTRUCTION RENTAL RATE

—

CAP RATES

—

Excluding delivered product, Atlanta’s industrial market over the past couple of years has managed to backfill almost 100% of the space vacated during the Great Recession. However, when factoring in the 17.2 million square feet of industrial deliveries during this same time frame, the more realistic percentage of space recovered from the economic downturn falls somewhere closer to 21%; still significant nonetheless. What is puzzling about this though, is the positive absorption in 2010 and 2011 has occurred without any true employment growth in the area. Since 2008, metro Atlanta’s total employment has dropped 2%. This suggests companies are leasing more space while employing less people. 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 $3.75 $3.75

30,000,000

16%

25,000,000

14%

20,000,000

12%

$3.50 $3.50

10%

Market AVG

Bulk Warehouse*

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

www.colliers.com/atlanta

4% 2011

2010

2009

2008

2007

2006

(5,000,000)

2005

0 2004

$2.50 $2.50

5,000,000 2003

2011 2011

2010 2010

2009 2009

2008 2008

$2.75 $2.75

10,000,000

2002

$3.00 $3.00

Square Feet

15,000,000 $3.25 $3.25

2% 0%

(10,000,000)

-2%

(15,000,000)

-4% Absorption

Deliveries

Vacancy %

Atlanta’s industrial market finished the year with just over 9 million square feet absorbed; the strongest year since 2007. Deliveries totaled 2,216,998 SF which is the smallest amount ever delivered on record in a year. Overall industrial vacancy in Atlanta has dropped significantly since its peak in 2010; down to 13.6%. The coming year should see much of the same results as 2011.

MARKET REPORT | YEAR-END 2011 | INDUSTRIAL | ATLANTA

DEFINITIONS Absorption (Net)-The net change in 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.

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

It also suggests companies are not fully utilizing their new industrial spaces as of yet, or have become more efficient in space usage perhaps. Given that local economists are forecasting another meager year of job growth, it will be interesting to see if Atlanta’s industrial market will continue to produce the same positive results like in 2011. Some developers believe so. Most recently, IDI announced plans for a 650,000 SF spec industrial building in the I-20 West/Fulton Industrial submarket to be delivered in the third quarter of 2012. This would be the first spec building in metro Atlanta since 2008. The positive activity, most notably from this year, has provided a sense of optimism in the market. The year ahead will reveal whether or not the momentum continues towards the complete recovery of Atlanta’s industrial market.

VACANCY & AVAILABILITY 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’.

•

Shallow-Bay Distribution-A type of building

ABSORPTION & LEASING ACTIVITY

As a result of fourth quarter activity, Atlanta’s industrial vacancy rate continued to show a steady decline. At 13.6%, the rate is down 0.4% from last quarter. For the year, the vacancy rate is down 1.2%.

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’.

•

The absence of new development in 2011 contributed to the significant drop in overall vacancy. Without the addition of new product, existing vacancies were the only supply available to meet demand in the market.

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’.

•

The current amount of industrial space available in Atlanta is the lowest it has been in 2.5 years. YEAR-END 2011 | Vacant Space By Type

•

Fourth quarter absorption totaled 2,424,061 SF; marking the sixth quarter in a row with an increase in occupancy.

•

Industrial absorption in 2011 topped 9 million square feet; the best year since 2007.

•

The largest tenants taking occupancy this year were: Lowe’s (1.3 million sq. ft.), Clorox (1.2 million sq. ft.), Phillips Van Heusen (851,349 SF) and Electrolux (600,000 SF). All of these move-ins occurred in South Atlanta.

•

Smaller sized tenants accounted for approximately 35% of total absorption this year. YEAR-END 2011 | Net Absorption by Submarket

I-20W | FULTON IND

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

Warehouse

Shallow-Bay

Flex

(1,000,000)

UPDATE Largest Transactions in the Market for 2011 SALES ACTIVITY PROPERTY

SUBMARKET

SALES DATE

SALE PRICE

SIZE SF

PRICE / SF

BUYER

1187 Hightower Trail

Snapfinger/I-20 East Ind

3/29/2011

$33,800,000

1,370,000

$24.67

Industrial Income Trust

Horizon Creek Distr. Ctr.

Northeast Atlanta Ind

8/12/2011

$29,000,000

482,896

$60.05

Lincoln Property Co.

1793 GA Hwy. 42

South Atlanta Ind

12/15/2011

$28,270,000

796,450

$35.50

IDI

2900 Thornton Rd.

I-20 West/Fulton Ind

3/30/2011

$22,000,000

476,086

$46.21

Colony Realty Partners

LEASING ACTIVITY PROPERTY

SUBMARKET

TENANT

LANDLORD

SIZE SF

TYPE

Warehouse Renewal

ProLogis Greenwood 100

South Atlanta Ind

Home Depot

ProLogis

1,245,868

7780 Spence Rd.

South Atlanta Ind

Electrolux

ING Clarion

600,000

Warehouse Lease

Hartman V

I-20 West/Fulton Ind

Czarnowski Display

Opus

569,673

Warehouse Lease

Old Peachtree/Satellite Blvd.

Northeast Atlanta Ind

Mitsubishi

IDI

560,000

Build-To-Suit

P. 2

| COLLIERS INTERNATIONAL

CHATTAHOOCHEE

1,000,000

NORTH CENTRAL

Build-To-Suit-A term describing property that

2,000,000

CENTRAL ATLANTA

FLEX 9,632,779 SF VCY RATE = 16.9%

3,000,000

SNAPFINGER | I-20 EAST

SHALLOW-BAY 11,594,699 SF VCY RATE = 14.7%

STONE MOUNTAIN

4,000,000

NORTHWEST ATLANTA

WAREHOUSE 60,443,372 SF VCY RATE = 13%

SOUTH ATLANTA

5,000,000

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.

NORTHEAST ATLANTA

6,000,000

Leasing Activity-The volume of square

MARKET REPORT | YEAR-END 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 207 Total 343

2,726,153 1,481,923 11,177,300 15,385,376

9.9% 5.8% 7.4% 7.7%

CHATTAHOOCHEE IND. Flex 112 Shallow-Bay 27 Warehouse 363 Total 502

2,737,424 862,949 17,766,559 21,366,932

9.8% 13.1% 8.2% 8.6%

I-20 W / FULTON IND. Flex 97 Shallow-Bay 218 Warehouse 765 Total 1,080

3,054,918 12,801,002 75,053,426 90,909,346

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)

271,103 86,310 826,336 1,183,749

9.9% 5.8% 7.4% 7.7%

8.4% 5.8% 7.9% 7.8%

(40,811) 0 57,800 16,989

(114,647) (22,810) 207,938 70,481

$10.10 $2.67 $3.29 $4.14

0.0% 0.0%

269,241 112,870 1,454,025 1,836,136

9.8% 13.1% 8.2% 8.6%

10.1% 14.8% 7.9% 8.5%

6,417 14,870 (48,854) (27,567)

(26,002) (3,130) (192,384) (221,516)

$7.45 $3.85 $4.88 $5.02

15.3% 13.2% 14.9% 14.7%

0.1% 0.3% 0.3%

468,036 1,691,758 11,433,580 13,593,374

15.3% 13.2% 15.2% 15.0%

14.2% 13.7% 15.7% 15.4%

(34,463) 61,188 367,557 394,282

(26,272) 141,587 (99,891) 15,424

$7.20 $2.50 $2.99 $3.03

NORTH CENTRAL ATLANTA IND. Flex 229 8,361,741 Shallow-Bay 133 5,192,083 Warehouse 355 13,758,462 Total 717 27,312,286

22.0% 7.6% 11.0% 13.7%

0.1% 0.2% 0.2% 0.2%

1,851,661 401,123 1,533,547 3,786,331

22.1% 7.7% 11.1% 13.9%

22.5% 8.8% 10.7% 14.0%

31,919 53,500 39,927 125,346

(264,640) 159,154 172,021 66,535

$8.88 $6.63 $4.61 $6.20

NORTHEAST ATLANTA IND. Flex 635 18,791,176 Shallow-Bay 469 23,534,627 Warehouse 1,604 126,893,875 Total 2,708 169,219,678

20.7% 14.0% 12.8% 13.9%

0.6% 0.2% 0.4% 0.4%

3,989,672 3,350,787 16,813,104 24,153,563

21.2% 14.2% 13.2% 14.3%

20.6% 15.0% 13.5% 14.5%

(117,264) 172,573 328,002 383,311

(264,333) 651,280 1,613,668 2,000,615

NORTHWEST ATLANTA IND. Flex 302 9,816,369 Shallow-Bay 217 9,345,069 Warehouse 799 41,834,422 Total 1,318 60,995,860

13.0% 14.1% 12.9% 13.1%

1.3% 0.3% 0.4%

1,399,023 1,316,918 5,536,583 8,252,524

14.3% 14.1% 13.2% 13.5%

14.3% 14.9% 14.6% 14.6%

8,361 74,351 559,348 642,060

64,889 261,873 612,232 938,994

$9.06 $4.32 $3.62 $4.00

SNAPFINGER / I-20 EAST IND. Flex 120 3,174,601 Shallow-Bay 103 4,703,011 Warehouse 425 36,245,584 Total 648 44,123,196

7.5% 12.5% 9.4% 9.6%

238,565 587,320 3,396,313 4,222,198

7.5% 12.5% 9.4% 9.6%

8.0% 12.7% 9.6% 9.8%

15,330 8,504 69,490 93,324

(17,218) (48,290) 713,668 648,160

$4.19 $2.78 $3.02 $3.07

SOUTH ATLANTA IND. Flex 221 Shallow-Bay 227 Warehouse 1,107 Total 1,555

4,946,928 13,781,168 125,846,279 144,574,375

7.3% 21.3% 12.5% 13.1%

0.3% 0.1% 1.6% 1.4%

375,022 2,938,967 17,750,781 21,064,770

7.6% 21.3% 14.1% 14.6%

7.8% 21.8% 14.5% 15.0%

12,303 64,807 474,882 551,992

37,290 (398,044) 5,502,859 5,142,105

$6.70 $3.27 $2.95 $3.00

3,386,542 7,076,286 15,943,829 26,406,657

22.8% 15.7% 10.6% 13.5%

0.1% 0.1%

770,456 1,108,646 1,699,103 3,578,205

22.8% 15.7% 10.7% 13.6%

21.4% 19.0% 11.0% 14.5%

(45,365) 233,312 56,377 244,324

(3,492) 266,914 96,318 359,740

$4.26 $3.31 $2.98 $3.21

ATLANTA MARKET GRAND TOTAL Flex 1,939 56,995,852 Shallow-Bay 1,606 78,778,118 Warehouse 5,934 464,519,736 Total 9,479 600,293,706

16.4% 14.6% 12.4% 13.1%

0.5% 0.1% 0.6% 0.6%

9,632,779 11,594,699 60,443,372 81,670,850

16.9% 14.7% 13.0% 13.6%

16.6% 15.6% 13.4% 14.0%

(163,573) 683,105 1,904,529 2,424,061

(614,425) 1,008,534 8,626,429 9,020,538

0.6% 0.6% 0.4% 0.5% 0.5%

81,670,850 83,980,142 87,331,929 87,396,296 88,474,390

13.6% 14.0% 14.6% 14.6% 14.8%

14.0% 14.6% 14.6% 14.8% 15.0%

2,424,061 3,821,793 64,367 2,710,317 1,139,914

9,020,538 6,596,477 2,774,684 2,710,317 611,436

STONE MOUNTAIN IND. Flex 133 Shallow-Bay 166 Warehouse 309 Total 608

TOTAL VCY SF

ABSORPTION

114,769 114,769

482,223 482,223

1,620,006 1,620,006

204,250 204,250

$7.22 $3.88 $3.50 $3.84

114,769 114,769

2,216,998 2,216,998

204,250 204,250

$7.29 $3.57 $3.23 $3.49

114,769 470,006 1,632,223 -

2,216,998 2,102,229 1,632,223 1,632,223 2,794,918

204,250 114,769 584,775 570,506 2,102,229

$3.49 $3.46 $3.42 $3.45 $3.46

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

9,479 9,477 9,475 9,475 9,473

600,293,706 600,178,937 599,708,931 599,708,931 598,076,708

13.1% 13.4% 14.1% 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 | YEAR-END 2011 | INDUSTRIAL | ATLANTA

CONSTRUCTION

RENTAL RATES & CONCESSIONS

•

2011 deliveries totaled 2,216,998 square feet. This was the lowest amount of industrial square footage ever added to the Atlanta market in a year.

•

Build-to-suits by Clorox, Aldi and SANY America accounted for 92% of the space delivered.

•

In 2012, build-to-suits will continue to dominate construction activity. There is already 1.5 million square feet scheduled to be built.

The overall market rate for industrial rents have likely bottomed. The average was consistently around $3.45/sf throughout the year.

•

It is possible rental rates will begin to show some upwards trend in 2012.

512 offices in 61 countries on 6 continents United States: 125 Canada: 38 Latin America: 18 Asia Pacific: 214 EMEA: 117

SALES ACTIVITY

Industrial Developments International (IDI) will begin construction on the first spec industrial building since 2008 in the coming year.

•

Investment sales topped $400 million dollars in volume in 2011; with 12 million sq. ft. sold.

•

Lowe’s and Bed Bath & Beyond were the most notable users sales in 2011. Both companies secured large properties for their industrial space needs in Atlanta.

•

$1.5 billion in annual revenue

• Over 2.2 billion square feet under

management • Over 13,000 professionals

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

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.

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 512 offices throughout more than 61 countries worldwide.

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