Amazon Has Leased 5M SF Of Atlanta Industrial Properties In 2020, Driving Major Market Gains

The coronavirus pandemic's impact on shopping habits has been a boon for Atlanta's industrial real estate market this year.

Companies absorbed more than 4.4M SF in Metro Atlanta's industrial market during the second quarter, nearly nine times more than the 500K SF of positive absorption in Q1, according to Colliers International. January, February and March was one of the slowest industrial leasing periods in Metro Atlanta in recent years, affected mainly by the onset of the coronavirus pandemic, which affected supply chains coming out of Asia and Europe before it started infecting millions of Americans.

Now, some industry experts see Atlanta's industrial market coming back.

“This is not a blip, but rather a return to normalcy,” Dermody Properties partner Greg Ryan said.

Atlanta's industrial mojo has been driven mainly by one company: Amazon. The online retail giant, which has been on a growth tear in Metro Atlanta this year, leased 3.7M SF in Q2, including 1.1M SF at Chattahoochee Logistics Center in the Fulton industrial market, and 1M SF each at Northeast 85 Logistics Center and Core5 Partners' Crossroads Business Center in South Atlanta.

Amazon's dominance in Atlanta leasing began at the start of the year and only accelerated during the pandemic. The online retail giant now leases more than 11M SF across the metro area, 5M SF of which was inked in 2020.

But companies beyond Amazon are seeking industrial space in Atlanta, Newmark Knight Frank Research Director Marianne Skorupski said.

“Definitely, Amazon has been the leader of the pack for arguably 12 to 18 months, not just in Atlanta, but nationally,” Skorupski said. “We still have a lot of demand in the market that's coming. We know there are a handful of deals that were in the process [of leasing] at the end of the second quarter, but should be signed this quarter to give us momentum.”

Activity is focused on e-commerce and retailers building up their warehouse networks, especially as consumers rely more on home delivery than shopping in the stores during the pandemic, Skorupski said. Online sales in the U.S. exceeded $73B in June, a year-over-year jump of 76%, according to an Adobe Analytics report.

“People still need to consume, they are just using different channels now,” Ryan said.

Other big deals this past quarter outside of Amazon included Tory Burch, Carter's and Nestle Purina along with major third-party logistic companies. And deals signed this past year, including Ferrero, XPO Logistics for Boeing, Facebook and Mondelez Global, could help absorption in the third quarter top 10M SF, which would be a record for Metro Atlanta, Colliers International officials said in a report.

“There's no question the interest of the consumer to spend time in a mall ... it's gone completely,” Seefried Properties Executive Chairman Ferdinand Seefried said.

Skorupski said there also has been strong leasing activity for warehouses 200K SF and smaller. And many e-commerce providers are seeking smaller warehouse spaces inside the Interstate 285 ring as companies strive for last-mile locations, Skorupski said.

“[The pandemic] just sped everything up,” she said. "Companies were planning for this [warehouse growth], this just sped up the time frame."

Developers have delivered 11 warehouses of 100K SF or more in the second quarter, including the 1.1M SF Chattahoochee Logistics Center. According to Newmark Knight Frank, there is still another 17M SF of projects underway in the market, of which 48.5% has been pre-leased.

But new construction is slowing down as banks toughen their construction lending standards, especially for speculative industrial developments, due to the economic uncertainty raised by the coronavirus's impact, Seefried said.

“That should help the existing spec buildings getting leased,” he said.

Contact Jarred Schenke at jarred@bisnow.com.