Future Cities
2022 North America Industrial Big Box Review & Outlook: Atlanta
March 11, 2022 5 Minute Read
As the gateway to the Southeast, Atlanta’s logistical infrastructure provides many users the unique opportunity to reach customers easily and at affordable rates compared with other major Tier 1 markets. Atlanta’s quality and depth of labor, along with its pro-business climate, creates a very compelling value proposition for distributors.
Demographics
Atlanta is the major population center of the Southeast and one of the fastest-growing metropolitan statistical areas (MSAs) in the country. More than 6 million people live within 50 miles of the market core. This number is expected to grow by 7.2% over the next five years. Nearly 30 million people live with 250 miles of the market core, 23% of whom are in the 18-to-34 age group.
Figure 1: Atlanta Population Analysis
Source: CBRE Location Intelligence.
According to CBRE Labor Analytics, the Atlanta MSA has 114,591 warehouse workers—a workforce that is expected to grow by 8.5% by 2030. The average wage for non-supervisory warehouse workers is $14.62 per hour, 2% lower than the national average.
Figure 2: Atlanta Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
*Median wage (1 year experience); non-supervisory warehouse material handlers.
Location Incentives
Over the past five years, there have been 51 economic incentives deals totaling more than $163 million for an average of $5,931 per new job in the Atlanta metropolitan area, according to Wavteq.
According to CBRE’s Location Incentives Group, among the top incentive programs offered in metro Atlanta is the Regional Economic Business Assistance (REBA) program, which is a discretionary cash grant used to enhance Georgia’s competitiveness in attracting economic development projects. REBA is considered a “deal-closing” grant in that it incentivizes companies to consider Georgia over other states or countries for their location or expansion. REBA funds may be used for any fixed-asset costs, including infrastructure, construction, real estate and personal property.
Another incentive program available in metro Atlanta is the Job Tax Credit, which awards businesses for creating net new full-time jobs. These credits can be applied toward a company’s corporate income tax liability or reduce the company’s payroll withholding requirements. To qualify, companies must be engaged in headquarters or R&D operations, or one of the following industries: manufacturing, warehousing/distribution/logistics, software development, contact centers, data centers, telecommunications and financial technology.
Figure 3: Atlanta Top Incentive Programs
Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.
Logistics Driver
From port to rail to air to road, Atlanta offers a plethora of logistics options. With service from CSX Transportation, Norfolk Southern and nearly two dozen short-line railroad companies, Atlanta has the most extensive rail system in the Southeast and serves as the region's largest intermodal hub. Interstate highways connect to 80% of the U.S. population within a two-day truck drive.
Atlanta Hartsfield-Jackson International Airport continues to see year-over-year gains in cargo volume. And Georgia's ports serve as magnets for international trade and investment. As the westernmost container port on the U.S. East Coast, the Port of Savannah enjoys a significant geographical advantage in reaching inland markets. Opened in 2018, the Appalachian Regional Port also is a gateway to North American markets. A network of major interstates, including north-south corridors I-95 and I-75 and east-west routes I-16, I-20 and I-85, means key cities and manufacturing points throughout the Southeast and Midwest can be reached within a one- to two-day drive.
Georgia's ports serve as magnets for international trade and investment.
Capital Markets
Atlanta had another year of record investment transactions, with strong investor demand across all property types and risk profiles. Cap rates compressed to 3.25% for Class A stabilized properties and had a 50-basis-point premium for value-add speculative development. We expect demand from both domestic and global investors to remain very strong and pricing to remain aggressive.
Figure 4: Cap Rate Comparison
Source: CBRE National Partners.
Supply & Demand
With 334 million sq. ft. of total inventory, Atlanta is the sixth largest big-box industrial market in North America. Annual net absorption totaled 25.0 million sq. ft. last year, up by 61% from 2020. General retailers & wholesalers, along with 3PLs, were the most active occupier types, accounting for more than 60% of the big-box leasing. The overall vacancy rate fell by nearly three percentage points in 2021 to 4.2%.
Developers remained bullish on the market and completed 12.3 million sq. ft in 2021, slightly more than the 11.4 million sq. ft. in 2020. The under-construction total skyrocketed to 30.8 million sq. ft., with 23% of it preleased. The increase in development will give occupiers more options to expand in 2022 but likely will be leased quickly. Continued strong demand from investors should result in an industrial cap rate of less than 4% in 2022.
Figure 5: Share of 2021 Leasing Activity by Occupier Type
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 6: Leasing Activity
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research.
Figure 7: 2021 Construction Completions vs. Overall Net Absorption
Source: CBRE Research.
Figure 8: Direct Vacancy Rate by Size Range
Source: CBRE Research.
Figure 9: Under Construction & Percentage Preleased
Source: CBRE Research.
Figure 10: Historical First Year Taking Rents (psf/yr)
Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.
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Contacts
James Breeze
Vice President, Global Industrial and Retail Research
John Morris
President, Americas Industrial & Logistics, Advisory Services
