Atlanta Industrial Market Sees Slowing Demand and Rising Vacancies in Q1 2025
EXECUTIVE SUMMARY
Q1 in Review
The Atlanta industrial market experienced a marked slowdown in Q1 2025 amid suppressed leasing activity and lower absorption. Leasing activity dropped from 13 million square feet to 6.9 million square feet, marking a notable 47% decrease from the previous quarter, and down 24% below last year’s levels. Major transactions that occurred in Q1 2025 included GXO Logistics, Roses, Staci Americas and Burr Computer Environments Inc. Net absorption posted a significant drop, falling 27% quarterly and 87% annually to 347,300 square feet for the quarter. Demand has concentrated mostly on Warehouse/Distribution properties, with Manufacturing and Flex spaces underperforming or remaining flat.
The vacancy rate rose 30 basis points over the quarter from 7.8% to 8.1% and increased 150 basis points year-over-year from 6.9%, as new deliveries outpaced demand. The market is still considered to be in neutral conditions (8% to 10% vacancy), but is inching closer to a more tenant-driven market with future increases in vacancy anticipated. Construction activity remains elevated, with 17.2 million square feet currently underway, but is 15% less than a year ago. Rental rates dipped quarterly and annually, driven by an increase in vacancy. The Atlanta industrial market is slowing after years of robust leasing and construction. Decreased deliveries should help with future negative demand, but only if developers constrain speculative development in the near term.
Atlanta Economic Update
The unemployment rate for the Atlanta metro area dropped to 3.4% in January 2025, significantly lower than the national average of 4.4%, according to the U.S. Bureau of Labor Statistics (BLS) Local Area Unemployment Statistics. This marks a decline from 4.0% in July 2024 and reflects the region’s robust recovery from pandemic-related job losses. Total employment in Atlanta increased by 0.8% from January 2024 to January 2025, as reported by the BLS Current Employment Statistics, building on a trend that saw approximately 3.1 million jobs in the area as of January 2025.
Job growth in Atlanta remains vigorous, with notable gains over the past year in sectors such as healthcare, finance, and hospitality, according to BLS data. Counties like Cobb, DeKalb, Fulton, and Gwinnett contribute to this economic strength with competitive wages and steady employment increases. Long-term, Atlanta continues to leverage its lower living and business costs compared to major East and West Coast cities, maintaining its appeal as a prime destination for businesses and residents.
MARKET OVERVIEW
Leasing Activity Down
Quarterly leasing velocity—comprised of new leases and renewals—stood at 6.9 million sq. ft., a considerable drop of 47% from Q4 2024 and down 24% from last year’s level. Notable recent leasing activity includes GXO Logistics’ lease for 396,000 sq. ft. in the Westfork Business Park, Roses’ 485,000 sq. ft. lease in the Shenandoah Industrial Park, and Staci Americas signing a 328,000 sq. ft. lease at the Suwanee Logistics Center.
Positive Net Absorption Down for the Quarter and Year Over Year
Net absorption—move-ins minus move-outs—dropped 27% over the quarter and 87% year over year, recording 347,300 sq. ft. in Q1 2025. Demand in the last several quarters has trended downward, with most demand for space concentrated in more traditional Warehouse/Distribution space. Flex was negative for the quarter, while Manufacturing properties improved. Notable move-ins in early 2025 include Zoetis Inc. moving into 644,000 sq. ft. at Lithia Springs Distribution Center, Allen Distribution moving into 375,000 sq. ft. at Wilkerson Mill Distribution Center, and Dropp Logistics moving into 271,000 sq. ft. at SouthPark.
Vacancy Rate Increased to 8.1% as New Deliveries Outpaced Demand
The overall vacancy rate in Atlanta’s industrial market increased from 7.8% in Q4 2024 to 8.1% in Q1 2025. Like most major industrial markets across the country, a robust pipeline of new construction over the past two years has moved the overall market from a landlord market to more neutral conditions (8% to 10% vacancy). Year-over-year, the vacancy rate increased 150 basis points from 6.6%. Flex, Manufacturing, and Warehouse/Distribution space have vacancy rates of 5.8%, 3.7%, and 8.7%, respectively. As new deliveries continue to outpace demand, the overall vacancy rate is forecasted to increase over the next few quarters.
Under Construction Pipeline Still Elevated But Trending Downward
New deliveries in Q1 2025 outpaced net absorption with 1.6 million sq. ft. completed versus the 347,300 sq. ft. absorbed. Although deliveries were down 65%, the construction pipeline increased quarterly to 17.2 million sq. ft., but is still down 15% year over year.
Investment Sales Trends
Over the past year, 632 industrial properties were sold in the Atlanta industrial market with an average transaction price of $122 and an average cap rate of 6.6%. Notable sales transactions in early 2025 include Hartz Mountain Industries, Inc. acquired the 240,000 sq. ft., 4-building Chamblee International Logistics Center for approximately $271 per sq. ft. from Stonemont Financial Group. Also, Atlantic Packaging purchased the 141,000 sq. ft. 889 Blandenburg Rd. manufacturing facility from Printpack Inc. for approximately $56 per sq. ft.
Rates Dip for the Quarter and Year
The average monthly rental rate (NNN) for Atlanta’s industrial market is $9.30 per sq. ft. This is a 1.7% decrease over the past quarter, when the average rate was $9.46 per sq. ft. The average rental rate for Warehouse/Distribution properties is $8.57 per sq. ft, while the average rental rates for Flex and Manufacturing are $15.08 and $6.70 per sq. ft., respectively.
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Steve Triolet
SVP of Research and Market Forecasting
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