2025 Biannual Industrial Market Overview: Part Four

As the industrial market recalibrates in 2025, shifting trade dynamics, softening rent trends, and evolving tenant behavior are creating new risks—and opportunities. In this blog series, we’re breaking down the most important insights from CompStak’s latest Biannual Industrial Report.

In this post, we’ll take a closer look at the industrial market and what it means for landlords, tenants, and investors navigating today’s industrial landscape.

Interested in the full insights? Download the full report here!

Part II: Deeper Dive – Atlanta

Key findings:

Atlanta’s manufacturing and transportation & warehousing employment trended downward through March 2025, with warehousing down 10% from its December 2023 peak and manufacturing down 1.4% from its June 2023 high.

Starting rents in Atlanta’s industrial market have declined for three consecutive quarters, while effective rents remain more stable, down just 1.3% from their Q2 2024 peak.

From the peak rent period (Q3 2023–Q2 2024) to the most recent three quarters (Q3 2024–Q1 2025), free rent in Atlanta surged 57%, while average annual lease escalations declined just 12 basis points, helped by longer lease terms that allowed landlords to preserve effective rent levels.

Manufacturing Employment Shows Signs of Decline in Atlanta While Warehousing Sector Sees Sharper Drop since Recent 2023 Peaks

Employment in Atlanta’s manufacturing and transportation & warehousing sectors was trending downward as of March 2025, with transportation & warehousing declining more sharply than manufacturing. Manufacturing employment was down 1.4% from its recent peak in June 2023, while transportation & warehousing employment had fallen 10% from its December 2023 peak. In March, manufacturing employment rose slightly (+0.1% month over month), while transportation & warehousing declined by 1.1% month over month and reached its lowest level since September 2021.

Atlanta’s Industrial Vacancy Still Lower Than U.S. Average, But Climbs Faster Year Over Year In Q1 2025

Atlanta industrial vacancy rates have remained below the national average for over five years, but are rising at a faster pace year over year, as of Q1 2025, with Atlanta up 178 basis points as compared to the increase of 60 basis points in the average for the U.S. overall. Industrial vacancy in Atlanta reached 2.5% in the first quarter of this year, 150 basis points below the national average of 4%, but 210 basis points higher than their most recent low reached in Q4 2022. Meanwhile, the U.S. industrial vacancy rate has risen 250 basis points over that same period.

Atlanta’s Average Starting Rents Have Declined Three Straight Quarters, while Effective Rents Hold More Steady

Mirroring trends elsewhere in the broader industrial sector, Atlanta’s market is showing signs of softness as starting rents have declined for the past three quarters from their recent peak reached in Q2 2024. This places Atlanta behind notable markets like Los Angeles – OC – Inland Empire, which peaked 6 quarters ago in the third quarter of 2023 and are down a more substantial 21.9% from peak. Notably, effective rents have held more steady during the same period and are down just 1.3% from peak, also in Q2 2024, leading to an increasing spread between the two metrics over this period. This suggests that while landlords are yielding more on starting rents, they are less flexible on other parts of the deal, like escalations and lease length.

Effective Rents Decline Less Than Starting Rents in Atlanta, Supported by Longer Lease Terms and Elevated Escalations

From Q3 2024 to Q1 2025, average starting rent in Atlanta declined 3.0%, a sharper drop than the 0.6% decrease in effective rent, despite a 57.0% surge in free rent months compared to the prior peak period (Q3 2023–Q2 2024). During this time, average annual lease escalations declined only 12 basis points—likely supported by longer lease terms, which have increased from both pre-COVID and peak-period levels. Notably, this pattern contrasts with major market averages, where effective rents have declined slightly more than starting rents from their peak.

Atlanta’s Industrial Market Reflects National Shift Toward Tenant Favorability With Continued Rise in Free Rent Ratios

Since peaking in Q2 2024, Atlanta’s average starting and effective rents have softened, while the average free rent ratio has risen by 90 basis points to 2.5%—still below the national average of 4.4%. During this period, average lease terms in Atlanta increased by over 9%. Still, the average length of free rent periods surged more than 60%, indicating that tenants are negotiating longer leases with more substantial concessions. This diverges from national trends, where lease terms have generally shortened post-COVID, making Atlanta a key market to watch.

Atlanta’s Top Five Renewals in Q4 2024–Q1 2025 See 60.4% Average Rent Hike

Across Atlanta’s top five largest renewals by transaction size completed from Q4 2024 to Q1 2025, the weighted average rent increase from ending rent to new rent was 60.4%, reflecting substantial repricing for leases largely signed around 2020. These renewals had a weighted average starting rent of $6.79, on par with the market-wide average for renewals during the same period. The largest increase came from Duracell’s renewal in South Atlanta, which saw an 80.1% jump from the ending rent of its 2016-executed lease. Meanwhile, Amazon’s 10-year renewal at 4905 Derrick Road was the longest term among the group but featured the lowest annual lease escalation.

Interested in more insights? Download the full report here!