ATLANTA (May 17, 2016) – Because it’s so easy to put up new distribution centers and warehouses in metro Atlanta, the market always is at risk of becoming overbuilt. But we’re nowhere near going over that cliff right now, a top industrial developer told a panel of experts this morning.
“Yes, we’re headed toward being overbuilt, whether it be tomorrow or 10 years from now,” said Jay Mitchell, who just joined DCT Industrial Trust as senior vice president overseeing Memphis, Nashville and Atlanta. The REIT is based in Denver.
Mitchell offered his assessment of Atlanta’s 675 million-square-foot industrial market during Bisnow’s 2016 Atlanta Industrial Update at the JW Marriott in Buckhead. The enormous size of Atlanta’s industrial portfolio ranks the metro area as the country’s fourth-largest distribution hub.
Mitchell offered a three-year comparison of net absorption and speculative industrial space under construction to back up his point. In 2013, net absorption outpaced speculative construction 4-to-1. In 2015, the amount of space absorbed and under construction were equal, meaning busy developers had made up lost ground and delivered new space at a nice clip. “That trend gives you a little bit of a pause,” Mitchell said.
Still, all but 800,000 of the 5.8 million square feet of new distribution centers and warehouses delivered so far this year remains available. “The trend is strong. The market is healthy,” and DCT is bullish on the market, “especially in Atlanta,” Mitchell emphasized.
Moreover, Atlanta’s long-term industrial outlook is positive, thanks to “a major shift” in demand for property types and the summer opening of the Panama Canal expansion, said Lisa Ward of Core5 Industrial Partners. Ward and Mitchell used to work together at former powerhouse IDI.
Ward said e-commerce continues to create demand for new, smaller and nimbler building types that enable retailers and e-tailers to ship quickly – often within hours – directly to consumers.
The Panama Canal expansion, set to open this summer, will be “a needle-mover for the Port of Savannah” and Atlanta.
When Bob Johnson of Marcus & Millichap flat out asked Mitchell whether it’s time to apply the brakes on industrial development, the REIT executive said No.
“Pumping the brakes is always a good thing if you see a cliff coming,” Mitchell said. “But we don’t see a cliff coming right now.”