Atlanta’s industrial market is currently experiencing a notable overcapacity, according to CBRE Executive Vice President Blaine Kelley, who stated, “Atlanta does what Atlanta always does, which is to overbuild. It’s not a calamity, but we are overbuilt, and the market is feeling pretty soft right now.”
This trend comes in the wake of the COVID-19 pandemic, which significantly disrupted supply chains and created an unprecedented demand for warehouses and shipping centers. In 2022, construction began on what would typically constitute a year’s worth of warehouse space every three months, leading to an increased backlog of projects.
Lisa Pittman, the logistics and industrial services group leader for Cushman & Wakefield, explained, “We had so much construction deliver in 2023 and 2024 that we’re still kind of chipping away at that.”
While Atlanta’s data center market, which is designed for housing computer servers, has seen a surge in construction numbers over the past two years, the same cannot be said for logistics warehouses and rentable manufacturing space.
The industrial vacancy rate in the region has risen to 8.6%, more than double the figures from 2022, as reported by CBRE. This increase is primarily attributed to the lack of significant leases completed this year, with no industrial lease over 500,000 square feet being finalized in 2025.
This situation has posed challenges for new buildings seeking to attract larger tenants, as evidenced by at least eight warehouses that were brought to market since 2023, which remain entirely vacant, according to a CBRE survey.
Kelley noted, “No one in the leasing business likes to talk about a vacant anniversary. But there’s some anniversaries out there.”
Economic experts are drawing parallels between Atlanta’s industrial situation and the “bullwhip effect,” a concept that describes how minor changes in consumer demand can create significant disruptions throughout supply chains, leading to overcorrections. Kelley pointed out how this phenomenon was witnessed during the pandemic, with consumers observing empty grocery shelves and used car lots.
He reflected, “Five years ago, we couldn’t find anything at all. Toilet paper, cars, semiconductors, T-shirts. Then we had too much. That oscillation really shows up in real estate as well.”
In contrast to other market sectors, like the office market, which have struggled due to shifts towards remote work resulting in record vacancies, the industrial sector has remained resilient. The region has experienced steady population growth and influx of corporate investments, which have insulated the industrial market from broader economic difficulties.
However, despite the challenges, several companies and real estate investment trusts have continued to invest in industrial projects or warehouse portfolios. For instance, Philadelphia-based Alterra IOS recently secured a $343.6 million loan aimed at acquiring over 350 industrial sites nationwide, including those located in Atlanta. Similarly, Canadian private equity firm Brookfield concluded a $438 million deal in July to purchase a portfolio comprising 53 industrial warehouses, inclusive of properties in Atlanta.
Brookfield executive Andy Smith emphasized in a statement, “Industrial properties still present a strong investment opportunity despite increased market uncertainty and rising replacement costs.”
On the leasing front, activity has been somewhat subdued but has maintained a level of momentum.
Cushman & Wakefield’s research manager, Audrey Giguere, noted that industrial lease signings rose more than 5% in the second quarter compared to the previous quarter. Meanwhile, lease renewals saw a significant increase of 25%, indicating a hint of confidence among tenants in the market.
Giguere remarked, “(That) signals some confidence in the market with people being willing to recommit to their spaces in Atlanta.”
Despite the increased availability of sublease options, the levels have remained relatively stable since late 2023. Real estate analysts regard the sublease market as a crucial indicator of tenants’ evaluations of their spatial needs.
Although there are several unoccupied new spaces, warehouses constructed after 2020 are notably outperforming older properties, reflecting a flight to quality similar to trends observed in the office sector.
Pittman expressed optimism about the potential for vacant spaces to fill, noting, “I think the window is closing rapidly. The market is going to shift quicker than (tenants) would like if they haven’t taken action prior to the next 60 days.”
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