Atlanta, Savannah Among North America’s Top Big-Box Warehouse Growth Markets

Staff Report

Wednesday, May 3rd, 2023

Two cities in Georgia, Atlanta and Savannah, were among the largest big-box warehouse growth markets in North America in 2022, according to a new report from CBRE. Savannah ranked second at a 12.3% yearly growth while Atlanta ranked 10th with 5.5% growth. 

Calculated as overall net absorption divided by existing inventory, only Phoenix’s growth rate ranked higher than Savannah’s at 14.3%. While Atlanta ranked third on last year’s report with a growth rate of 7.5%, Savannah did not appear in the top 10. Driven by container activity from the Port of Savannah, big-box lease transactions doubled in Savannah last year to a record 11.6 million sq. ft. This volume helped net absorption reach 8.9 million sq. ft. 

“Savannah is still one of the country’s most rapidly growing industrial markets. The Port of Savannah, the nation’s fastest-growing and fourth-busiest port, has fueled a decade of regional growth,” said William Lattimore, Senior Vice President with CBRE in Savannah. “Savannah has the country’s largest single terminal, on-terminal efficiencies, surrounding infrastructure, easy major interstate access, and more affordable rents than the Northeast and West Coast. Record spec construction is underway while vacancy remains minimal.” 

Savannah is no stranger to big-box warehouses, which are classified by CBRE as any warehouse above 200,000 sq. ft. With the city’s five-year deal size exceeding 400,000 sq. ft., six megawarehouse (or those 1 million sq. ft. or larger) leases were signed in 2022, bolstering the growing average size of warehouses in the region. Third-party logistics (3PL) providers accounted for 55.7% of all big-box leasing activity in Savannah last year. 

In a market of just 72 million sq. ft. of warehouse space, an additional 25.6 million sq. ft. is currently under construction. Some 37% of that space is preleased, one of the highest prelease percentages of any big-box market in North America. New warehouse space should be a welcome sight in Savannah, considering the market’s 0.9% direct vacancy rate.

Atlanta Overview

A staggering 38.1 million sq. ft. of big-box warehouse space is also being added in Georgia’s capital, nearly 15% of which is preleased. As North America’s sixth largest big-box industrial market, with 366 million sq. ft. of inventory, Atlanta experienced 27.6 million sq. ft. of leasing activity in 2022 and 20.2 million sq. ft. of net absorption. While this mark made it the fifth most active big-box market in the country, net absorption was down 20% from its 2021 peak.

General retail and wholesale tenants were the most active warehouse users in Atlanta last year, accounting for 49.2% of leasing activity. Of Atlanta’s eight megawarehouse leases signed in 2022, five were signed by retailers and wholesalers. The market’s direct vacancy rate currently sits at 5.7%. 

“Atlanta is the Southeast’s primary big-box market, with the region’s strongest distribution network,” said Tony Kepano, CBRE Vice Chair. “The market experienced record rent growth in 2022, even with record new product coming online. But with still-available inventory, stronger cost-efficiency, a business-friendly climate and a deep labor pool, Atlanta remains a top market for distributors.”

North American Overview

3PLs leased more big-box warehouse space in North America than any other occupier category last year. Accounting for 41% of all big-box lease transactions, 3PLs expanded their footprints and claimed the largest share for the first time since CBRE began tracking the activity in 2012.

3PLs typically operate companies’ logistics and warehousing operations on a contractual basis, gaining efficiencies by handling that work for multiple clients simultaneously. As a result of enduring pandemic-era shifts, companies have expanded their reliance on 3PL partners to create resilient supply chains and economically address customer needs. 

The previous leader in big-box leasing activity - retailers and wholesalers - fell to second place, taking 35.8% of the leasing share. Food and beverage occupiers were a distant third, accounting for 8.7% of leasing activity.

CBRE’s latest big-box report, which examines 25 markets in the United States, Mexico and Canada, found that industrial facilities had record-low vacancy rates and unprecedented rent growth in 2022, despite record new construction deliveries. Demand was driven primarily by a desire to serve markets with growing populations, modernize space for automation and improve supply chain resilience.

Matching 2021’s record low, the 2022 direct vacancy rate was 3.3% at year-end, which supported first-year base rents growth of 23% year-over-year. With demand for space at a high, and little space available, a record 455 million sq. ft. is currently under construction, of which 25.3% is pre-leased. 

To read the full report, click here.