The Atlanta industrial market has been on the upswing since the market finally pulled out of the recession. Just last week we reported that cap rates for industrial properties are at an all-time low (between 4.5-6% in most submarkets) and that demand is still larger than supply, which is driving rental rates up. But we also mentioned last week that the rental rate increases could be short lived, and here’s why.
Due to the sheer amount of construction activity in the market, Atlanta is currently experiencing a shortage of skilled labor. Between the new Falcons stadium, the new Braves stadium and accompanying mixed-use development, and dozens of major infrastructure improvements, there simply aren’t enough workers to meet the needs of the contractors. Many people in this industry left when the economy and construction industry collapsed in 2008 and haven’t returned.
Another reason that we will probably see rental rates decrease to their normal levels before it’s all said and done is the rising cost of construction materials. Now that the industrial and housing markets are beginning to recover across the country, materials are becoming more expensive, which in turn is driving up project costs.Share