Grubb & Ellis Provides Atlanta Q3 Industrial Market Snapshot

The following summary is designed to provide a brief overview of the Atlanta area industrial market during the third quarter of 2009.

ATLANTA REGION
- The regional industrial vacancy was 13.6 percent as of third quarter 2009, up 30 basis points from the previous quarter.

- Approximately 1.9 million, or 24 percent of the 8 million square feet of the negative absorption posted during the first nine months of the year came during the third quarter.

- Inventory of general industrial space stayed relatively flat, while occupancy in the R&D/Flex sector contracted by 257,400 square feet. Warehouse/distribution space felt the effects of reduced demand, posting negative absorption of more than 1.6 million square feet.

- Just one 20,000-square-foot multi-tenant warehouse/distribution facility is under construction in the Northwest/I-75 submarket.

Analysis:
While the Atlanta industrial market is still being affected by decreased national demand for goods and services, the third quarter was an improvement over the second quarter, which saw a 100-basis-point increase in vacancy and approximately 6 million square feet of negative absorption. Still, overall leasing activity is down and what activity has taken place has typically been the result of consolidations and restructurings. On the investment side, the gap between seller and buyer expectations is still significant, and investors will struggle to preserve the value of their assets as they approach loan maturation dates over the next few years. Going forward, the construction pipeline is expected to stay empty until excess space is absorbed and credit restrictions ease. Short-term and "blend-and-extend" leases with significant incentives will continue to be the norm through the end of the year.

Airport/South Atlanta
- The Airport/South Atlanta submarket gained positive ground during the third quarter with nearly 170,000 square feet of positive absorption.
- Vacancy stayed flat at 14.8 percent.

Analysis:
The only submarket to see significant gains, the Airport/South Atlanta submarket benefited from move-ins totaling more than 310,000 square feet by Inline Plastics and Ceva Logistics, as well as Briggs & Stratton's expansion of 104,000 square feet. The submarket should continue to benefit as a number of tenants that signed new leases over the last few months take occupancy.

Northeast/I-85 Corridor
- The vacancy rate ticked up 20 basis points as the Northeast industrial submarket experienced negative net absorption of 247,175 square feet.

Analysis:
Despite posting negative absorption, the Northeast submarket was the most active in terms of new large deals and renewals, including McKesson Medical Surgery's 200,000-square-foot lease, Trader Joe's 160,000-square-foot lease, Innotrac's 115,000-square-foot lease and Auto Metal Direct's 107,000-square-foot lease. As these new tenants take occupancy, the submarket should see its fundamentals stabilize.

NorthWEST/I-75 Corridor
- The vacancy rate jumped 140 basis points as the Northwest submarket saw negative net absorption of nearly 722,000 square feet, the most experienced by any submarket in the third quarter.

Analysis:
While the submarket's contraction was significant in the third quarter, those losses will be offset in part by approximately 230,000 square feet in new leases signed during the quarter by Aquafil, Southeast Concrete Products and others.

To access the full Atlanta Industrial Metro Trends report and other Grubb & Ellis research publications, visit www.grubb-ellis.com/research