Atlanta industrial real estate market powered by e-commerce in Q2
- The Atlanta industrial market returned to stronger absorption levels in the second quarter of 2020 with occupancy gains totaling just over 4.4 million square feet.
- Amazon and Walmart were the largest occupancies of the quarter accounting for almost half of net absorption.
- The balancing act between space absorbed and new inventory delivered led to Atlanta's overall vacancy rate remaining flat, though warehouse vacancy declined 20 basis points (0.2%) this quarter.
- Leasing activity was dominated by Amazon in Q2. The e-commerce giant transacted 3.7 million square feet of Atlanta's industrial warehouse and distribution space over the three month period.
- The average industrial rent in Atlanta is quickly approaching $5/SF. Atlanta's industrial market's overall upwards trajectory continues to be strong; however, bulk rents have shown some stagnation as of late.
- STrong gains in the second quarter brings Atlanta's industrial market back to the average quarterly levels experienced over the past three years. COVID-19's impact to the industrial market here has been minimal so far. The back half of the year looks solid.
Atlanta Industrial Market
As expected, second quarter results show a return to absorption levels the Atlanta industrial market has been used to over the past three years. Net absorption totaled 4.4 million square feet in Q2, bringing the year-to-date total to just over 4.7 million square feet. Million-square-foot occupancies by Amazon and Walmart were the largest of the quarter and contributed to almost half of the net absorption total.
The pandemic has put a premium on e-commerce activity. Amazon is securing locations in the major submarkets to allow it to services its customers in the fastest way possible, expanding its last-mile logistics infrastructure at breakneck speed.
Atlanta's industrial rental rate average is quickly approaching the $5/SF mark overall. IN spite of this, increases in the market's average bulk rental rate has mostly flattened over the past year and a half.
Atlanta Real Estate Market Forecast
The strong second quarter proves the Atlanta industrial market still has legs in its continued expansion. While the COVID-19 pandemic has greatly affected normal business activity in the overall economy, the industrial sector in Atlanta has so far seen more positives than negatives as a result of it.
The expansion of Amazon in Atlanta is beyond expectations and shows the company is taking advantage of new construction in the market to meet its last-mile logistics strategy.
Even so, COVID-19 still remains an unknown to the market. For now, it does not appear to be greatly impacting Atlanta, with the exception of a slight increase in sublease space availability and also a pause in overall investment activity. With Q2 expected to be the worst it gets in terms of GDP, the focus now shifts to managing the pandemic's overall influence on economic activity.
For Atlanta, it appears the industrial market should come out on top overall. The market's fundamentals and location have been the key drivers to its continued growth, even during the pandemic.