First-quarter numbers reveal that metro construction levels have dwindled, absorption has decreased, vacancies have risen and rental rates have dropped, according to Christopher Shaner, a market analyst at Dorey Market Analysis Group. "Lenders exhibited more caution and were a little tighter with their money," Shaner tells GlobeSt.com. "More was required from developers before construction could begin. This, along with economic conditions, precipitated a decrease in construction. Other natural restrictors, such as zoning and land issues, also created downward pressures."
During the first quarter of '01, 9.61 million sf of industrial space was under construction, compared to about 4.65 million sf in the first quarter of 2002, Shaner reports.
Net absorption decreased throughout Atlanta, although not as drastically. About 1.58 million sf was absorbed in 1Q 2001, compared to about 1.22 million feet in the first quarter of '02.
"Absorption decreased as more companies put expansion plans on hold and rode out the storm," Shaner explains. "With new space begun during the boom time still delivering to market and fewer big deals being made, vacancies increased.
"Also, Atlanta had capitalized on the dot-coms and so had more to lose as they went under," he continues. "The result of all this was increased vacancies."
Atlanta's metro market includes some 386.1 million sf of industrial space. Of that product, 14.4% is vacant, compared to a 12.2% overall vacancy rate posted during the first quarter of 2001, Shaner reports.
Availability in the Northeast/I-85 submarket reached 14.3%, with a total inventory of 108.25 million sf. During the first quarter of 2002, construction deliveries in the corridor totaled 595,795 sf and year-to-date absorption hit 166,761 sf, Dorey's reports.
At the beginning of last year, overall weighted maximum rents stood at $5.13 a sf, triple-net, compared to $4.82 a sf reported in the first quarter of 2002.
Unlike the office sector, a faster recovery period is expected for the region's industrial market, Shaner says, thanks to its reliance on more stable segments of the economy. "Apart from a couple big chunks of distribution space vacated during the dot-com fallout, the industrial market has not been hit the same way the office market was. Suffice it to say that the industrial market could see a recovery by year's end."
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