14/01: So long, Farewell, Auf Wiedersehen, Goodbye
Category: King Industrial Realty
Posted by: Wilson
Good Riddance
The curtain crashed down on the Atlanta Industrial market in the fourth quarter, bringing to an end a tumultuous 2008. A combination of overwhelming tenant turnover and sluggish leasing activity led to unprecedented negative net absorption and further fueled economic uncertainty to finish the year.
After an encouraging third quarter, Atlanta’s market fundamentals appeared to be heading in the right direction. However, a surge in tenant turnover during the fourth quarter erased this progression and resulted in -4,186,752 square feet of negative net absorption. This represents the worst single quarter for absorption since King Industrial Realty began tracking the Atlanta Industrial market more than 25years ago.
History demonstrates that tenant turnover, rather than lack of activity, is primarily responsible for Atlanta’s problems. Atlanta recorded 8,491,524 square feet of activity this quarter. In comparison, the fourth quarter of 2004 recorded virtually the same activity of 8,360,221 square feet. However, in contrast to 2008, the Atlanta Industrial market in 2004 was able to convert a remarkable 3,301,992 square feet of this productivity into positive net absorption, the difference being tenant retention.
Ten out of the 12 metro Atlanta submarkets recorded negative net absorption in the fourth quarter. In particular, the I-85 North distribution market concluded the year on an erratic note. On the one hand, it led all metro Atlanta submarkets with 1,861,232 square feet of activity in the fourth quarter; yet on the other hand, it had the dubious distinction of leading all metro Atlanta submarkets with -855,274 square feet of negative net absorption. The exceptions to the rule were the Airport submarket, which managed to record 344,851 square feet of positive net absorption and the Peachtree City submarket, with a modest 3,473 square feet of positive net absorption.
Meanwhile, in conjunction with this turmoil, Atlanta’s availability rate jumped one percent to 17.4 percent in the fourth quarter. Currently, first generation space comprises only 15 percent of the available space in metro Atlanta, while two years ago it accounted for 25.2 percent of the available space - evidence that developers are cautious about breaking ground on new spec construction projects at this time. In fact, 53.5 percent of the new construction projects launched in metro Atlanta over the last year were build-to-suit projects.
It has been a difficult year for the Atlanta Industrial market and it is uncertain what the future may hold. Hopefully though, the dramatic reductions in energy prices and low interest rates will stimulate the economy and help us get back on track in 2009.
Wilson Covington
The curtain crashed down on the Atlanta Industrial market in the fourth quarter, bringing to an end a tumultuous 2008. A combination of overwhelming tenant turnover and sluggish leasing activity led to unprecedented negative net absorption and further fueled economic uncertainty to finish the year.
After an encouraging third quarter, Atlanta’s market fundamentals appeared to be heading in the right direction. However, a surge in tenant turnover during the fourth quarter erased this progression and resulted in -4,186,752 square feet of negative net absorption. This represents the worst single quarter for absorption since King Industrial Realty began tracking the Atlanta Industrial market more than 25years ago.
History demonstrates that tenant turnover, rather than lack of activity, is primarily responsible for Atlanta’s problems. Atlanta recorded 8,491,524 square feet of activity this quarter. In comparison, the fourth quarter of 2004 recorded virtually the same activity of 8,360,221 square feet. However, in contrast to 2008, the Atlanta Industrial market in 2004 was able to convert a remarkable 3,301,992 square feet of this productivity into positive net absorption, the difference being tenant retention.
Ten out of the 12 metro Atlanta submarkets recorded negative net absorption in the fourth quarter. In particular, the I-85 North distribution market concluded the year on an erratic note. On the one hand, it led all metro Atlanta submarkets with 1,861,232 square feet of activity in the fourth quarter; yet on the other hand, it had the dubious distinction of leading all metro Atlanta submarkets with -855,274 square feet of negative net absorption. The exceptions to the rule were the Airport submarket, which managed to record 344,851 square feet of positive net absorption and the Peachtree City submarket, with a modest 3,473 square feet of positive net absorption.
Meanwhile, in conjunction with this turmoil, Atlanta’s availability rate jumped one percent to 17.4 percent in the fourth quarter. Currently, first generation space comprises only 15 percent of the available space in metro Atlanta, while two years ago it accounted for 25.2 percent of the available space - evidence that developers are cautious about breaking ground on new spec construction projects at this time. In fact, 53.5 percent of the new construction projects launched in metro Atlanta over the last year were build-to-suit projects.
It has been a difficult year for the Atlanta Industrial market and it is uncertain what the future may hold. Hopefully though, the dramatic reductions in energy prices and low interest rates will stimulate the economy and help us get back on track in 2009.
Wilson Covington