Atlanta is the hub and economic engine of the Southeast, which is the fastest growing region in the U.S. The city’s thriving economy and job base, coupled with its high quality and low cost of living, make it an ideal destination to draw young and educated talent from the region’s major universities.
With an overall population of 5.5 million throughout the 28-county metro area, Atlanta is the ninth–largest Metropolitan Statistical Area (MSA) in the United States and is projected to be the 6th most populated metro area by 2020. Over the course of the 1990s and into the 2000s, Atlanta evolved from the regional “capital” of the Southeast into its current distinction as a leading international city for business. During that period of time, Atlanta led the U.S. economy in terms of job growth, averaging between 80,000 and 100,000 new jobs created each year for several years.
Since the economic downturn in 2008, Atlanta’s positive economic momentum has returned. Atlanta prospers by combining layers of logistical advantages with a low cost of doing business, an educated workforce and high quality of living. Diversified and substantial investment from corporations and state and local governments make Atlanta a favorable place to conduct business.
Atlanta is home to the headquarters of 11 Fortune 500 companies including: Delta, Coca-Cola, UPS, Home Depot and Southern Company. An additional 2,100 international companies can be found in Atlanta. As further proof that Atlanta is a mainstay of global commerce, this fast-growing metropolis is also host to the busiest airport in the world in terms of passenger volume -- Hartsfield-Jackson Atlanta International Airport -- which averages over 250,000 passengers a day. Atlanta is also within a two-hour flight of 80 percent of the U.S. population.
Atlanta is one of the fastest-growing high-tech urban centers in the nation. Annual growth for tech jobs is projected at 4.5 to 5.0 percent, as compared to less than 2.0 percent for other industries. A pool of educated talent and Atlanta’s generally low cost of living are prime attractors for tech companies. More than 13,000 technology companies exist in Atlanta, and the city is established for its strengths in telecom, Internet security, digital media and a thriving mobility ecosystem. The Technology Association of Georgia, based in Atlanta, is one of the largest and most active tech organizations in the nation. Companies like NCR Corporation, First Data and Sony Ericsson are just a few examples of companies that have chosen to relocate to Atlanta in recent years.
Atlanta’s reputation as a healthcare hub continues to grow as industry players tackle new challenges and the sector attracts more investment. DeKalb County is home to the Centers for Disease Control and Prevention (CDC) as well as Emory University Hospital, which employs a staff of nearly 15,000.
Atlanta served as a focal point for Ebola expertise, as the recent Ebola epidemic has underscored the concentration of medical expertise and the sophistication of the medical facilities in Atlanta. Professionals at Emory University Hospital and the Centers for Disease Control and Prevention played leading roles in domestic efforts to combat the deadly virus.
Logistics and Transportation
Home to the busiest airport in the United States, Atlanta is a vital transportation and logistics hub. Investment in infrastructure in the years leading up to the 1996 Summer Olympics is one reason that Atlanta is now home to a number of leading transportation and logistics companies. The largest employer in the Metro Atlanta area is Delta Air Lines. One of the largest logistics companies in the world, United Parcel Service (UPS), moved its headquarters to Atlanta in 1991 and continues to be one of the city’s largest employers.
Atlanta is home to more than 50 accredited universities, colleges, and technical schools, including Georgia Institute of Technology, Emory University, Georgia State University, and the Atlanta University Center, which includes Clark, Spelman, and Morehouse colleges. More than 58% of individuals over the age of 25 in Atlanta have a post-secondary education, above the national average of 52%. Atlanta’s high concentration of educated professionals will continue to make the area a preferred destination for corporate relocations and expansions.
ADP's tenancy is diversified with concentrations in Healthcare (Humana, Dornier, Universal Hospital) and Technology (Noble Systems). Furthermore, the tenants within Vaughn, Roberts and Avalon are all logistics-based which draws them to the light-industrial nature of the buildings (truck courts, loading docks, etc.).
Overall Atlanta Office and Industrial Market
The Atlanta Class A and B office market encompasses 10 different submarkets totaling 162.8 million square feet. Of this total, 26.4 million square feet is direct vacant space, with the current Class A and B market vacancy resting at 16.9%.
The overall Atlanta office market absorbed 992,000 net square feet during the second quarter, the most in a single quarter since the start of 2014. This took the overall office market’s vacancy down to 17.0%, the lowest since the start of 2009. From 2009 to 2011, the market had negative 3.6 million square feet of net absorption and had a peak vacancy rate of 21.1%. Since that time, 8.2 million square feet of office space has been absorbed. The Class A office sector was responsible for 80% of the overall net absorption, posting 781,000 net square feet absorbed. This is the highest mark for Class A absorption since 2007. The absorption has pushed the Class A vacancy level to its lowest mark in 14 years (15.3%), when the market was 20 million square feet smaller. This activity has pushed Class A asking rents to pre-recession levels. The Northeast submarket boasted some of the quarter’s largest occupancies. Comcast occupied its new 88,000 square foot regional headquarters at 6200 The Corners Parkway, a move that is expected to add 150 new jobs to the area. Also in the Northeast, Liberty Mutual occupied a 52,000 square foot office space at The Terraces at Suwanee Gateway. Elsewhere, Veritiv occupied their 68,000 square foot headquarters at 400 Northpark, and Intercontinental Hotels Group expanded its office by 38,000 square feet at Three Ravinia for a total of 321,000 square feet, both in the Central Perimeter submarket. In Midtown, Norfolk Southern occupied a 92,000 square foot space at 400 Colony Square.
The Atlanta Industrial market includes 12 different submarkets containing 445.6 million square feet. Of this total 48.6 million square feet is direct vacant space, with current vacancy sitting at 11.2%, the lowest in 15 years.
The second quarter marks the 13th in a row with at least 1 million square feet of net absorption. The 3.8 million square feet absorbed reduced the overall vacancy to 11.3%, the lowest in 15 years. With the decreasing amount of available space, developers such as Majestic, Ridgeline, and TPA Group have ramped up construction of speculative space. The 10 million square feet of speculative space currently under construction is the most at one time in almost 10 years.
The Central Perimeter Atlanta Office Submarket
The Central Perimeter submarket is Atlanta’s largest office submarket containing 23.3 million square feet and 13.7% of Atlanta’s total office inventory. Central Perimeter has become the home to many of Atlanta's Fortune 100 and 500 companies with State Farm and Mercedes Benz being the most recent relocations. The central location and surplus of quality amenities provide tenants with efficient access to virtually all of Atlanta's educated talent base.
The Central Perimeter office market saw a market-leading 856,000 square feet absorbed in 2014, and an additional 168,698 through Q1 2015 dropping the vacancy rate to 15.2%. The submarket’s Class A vacancy rate of 11.7% is the lowest vacancy of all the Atlanta submarkets. While vacancy continues to drop, rents have consistently risen. Class A rents have gone up $2.30 per square foot since the start of 2014 to finish Q1 2015 at $26.30 per square foot.
In addition to rising rents and lower vacancies, the Central Perimeter Office market continues to attract large corporations. Construction continues on the 2.2 million square foot State Farm Insurance corporate campus. In addition, Mercedes-Benz USA announced it is relocating its U.S. Headquarters to Atlanta from Newark, NJ. Mercedes will invest about $100 million in a 200,000 square foot build-to-suit headquarters. The company is looking at potential sites in the Central Perimeter market and expects to be in its new office space in 2017. Meanwhile, Mercedes plans to move into temporary space starting in mid-year 2015. The move is expected to bring approximately 1,000 jobs to the Atlanta area.
The Northwest Atlanta Industrial Submarket
The Northwest Industrial submarket is Atlanta’s third largest industrial sector totaling 45.6 million square feet. Finishing 2014 on a strong note, Northwest Atlanta absorbed almost 800,000 square feet in the fourth quarter. The Northwest has the second-lowest vacancy rate at 9.6% and the second-highest average asking rents at $4.66.
The submarket has seen strong construction with 2.3 million square feet recently under construction, but these are mainly build-to-suit properties, most notably Surya Rugs 1 million square foot distribution center in Cartersville and the 500,000 square foot manufacturing facility for Beaulieu International. Shaw Carpets is in the process of occupying its new 750,000 square foot facility.
The Northeast Atlanta Industrial Submarket
The Northeast submarket contains Atlanta’s largest concentration of industrial space, with over 130.8MM square feet and a quarter of Atlanta’s industrial inventory. The majority of this submarket lies within Gwinnett County. Over 1.1 million square feet of industrial space was absorbed in Northeast Atlanta in the first quarter of 2015. At a vacancy rate of 9.2%, the lowest in 15 years when the submarket was 33 million square feet smaller, Atlanta’s largest industrial submarket enjoys the lowest vacancy rate in the overall industrial market. Overall industrial asking rents are $4.17 in the market, up slightly from $3.98 per square foot at the end of 2014.