Atlanta’s post-pandemic warehouse boom wanes. Experts say that’s OK

While the fast-changing tariff environment threatens to upend the market’s trajectory, Atlanta’s industrial sector appears to be entering a cruising altitude after its rapid ascent — rather than falling after the rise.

“The market is starting to stabilize from that unsustainable growth the pandemic had,” Justin Vines, research analyst for real estate services firm CBRE, said. “We feel that construction has hit a more stable point.”

About 8.1 million square feet of industrial space was under construction at the end of March, a 52% decrease from the first quarter of 2024 and the lowest in about a decade, according to CBRE data. Both quarters are dwarfed by an unprecedented streak between mid-2021 and mid-2023 where every three months saw at least 30 million square feet of new warehouse space begin construction.

Atlanta’s nation-leading data center market, a niche segment of industrial space designed to house computer servers, has similarly seen its construction figures balloon over the past two years. But experts like Vines said the torrent of traditional industrial construction for logistics warehouses and rentable manufacturing space — a separate classification from data centers — had to wane after the post-pandemic rush.

The constant crush of construction is a large source of employment across Georgia, which was highlighted last week at a celebratory luncheon for the scores of workers building a nearly 904,000-square-foot industrial park in Locust Grove, roughly an hour southeast of Atlanta.

Credit: Zachary Hansen / Zachary.Hansen@ajc.com

Credit: Zachary Hansen / Zachary.Hansen@ajc.com

The project by Stonemont Financial Group along I-75 will include three speculative warehouses, meaning no tenant is currently committed to lease the space. It is poised to be one of the largest industrial projects completed this year.

Gov. Brian Kemp joined Stonemont company leaders to cheer on the construction workers’ efforts, touting industrial projects of this scale for keeping blue collar workers employed. Kemp, however, did allude to the past few weeks of turmoil as the global economy absorbed President Donald Trump’s widespread tariffs.

“No matter what’s happening around the world and what’s happening around the rest of the country, I just want to make sure people in Georgia keep working,” Kemp said. “Because even if we have tough economic times, if we can keep people working, you can fight through those things.”

Building stability

The volume of industrial construction has counterbalanced other real estate types, which struggled to adjust to a post-pandemic economy.

Travel disruptions rippled through the hospitality sector, and the office market in Atlanta and other major cities witnessed vacancy skyrocket to record levels. Waning demand led to construction stalling, especially for office buildings, and Atlanta ended 2024 with the least amount of new workspace under construction on record.

Atlanta’s industrial market, in contrast, saw its vacancy rate dip to a record-low 3.4% in 2023, which analysts said was too snug for comfort.

“When we were down in the 3% (for vacancy rates), the market was so tight that it was more difficult to transact because there wasn’t as much available space,” Audrey Giguere, research manager for real estate services firm Cushman & Wakefield. “We predicted for vacancy to increase just because of the sheer amount of space that has been added to the market.”

Vacancy has ticked up to 8.1% to start 2025, a figure more in line with historical norms, Giguere added.

Despite it taking longer for some warehouses to find tenants, Atlanta’s industrial market has continued to record positive net absorption — a figure that measures whether a sector is growing. Atlanta’s struggling office market, by contrast, has posted negative net absorption for every quarter but one since 2023, according to CBRE.

The tariff variable

The natural ebb and flow of the industrial market could be thrown out of order by mounting international trade wars.

Leasing activity would be one of the first metrics hit, according to analysts. Atlanta was the fourth-busiest industrial market in the U.S. for leasing during the first quarter, according to Cushman & Wakefield. CBRE reported no lease was signed for more than 500,000 square feet, and its analysts said the lack of large tenants reflects their “hesitancy to take down large space amid political and economic uncertainties,” a landscape thrown into further turmoil by tariffs.

“Consumer spending is expected to decrease, which could keep leasing activity for big box spaces inactive,” CBRE’s first quarter industrial report for Atlanta said.

Credit: Courtesy of rendering.com

Credit: Courtesy of rendering.com

Shipping warehouses also rely on a steady flow of goods to transport, including products from overseas. The Port of Savannah, the fastest-growing port in the nation, is a pillar of the state’s logistics network, but it’s also vulnerable to trade changes spurred by tariffs.

“(The Port of Savannah) has direct implications on how Atlanta’s market performs,” Vines said.

The slight wane in demand, coupled with the increased amount of vacant space, has prompted industrial project owners to demand less in rent to attract tenants. During 2023 when vacancy was tight, average rents in the Atlanta market increased to $7.42 per square foot from $5.91, a 26% increase. The first quarter of 2025 saw average industrial rents dip to $7.21.

The slowdown in new construction could also be exacerbated if tariffs cause the price of metals and building materials to increase. While that would restrict supply, analysts say it would help coalesce demand into the newly finished warehouse space that’s now available. Counterintuitively, a constriction of available space could spur the next wave of industrial construction to begin.

“It is likely the market will experience a shortage of new space in the latter half of 2025 and early 2026, which could lead to increased demand for new projects,” CBRE’s report said.