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Flex Space Frenzy: Fast-Growing Sector Shows No Sign of Slowdown in Metro Atlanta

CRE professionals can't stop talking about how industrial has become a powerhouse sector throughout the pandemic, dominating developers' strategies and overshadowing other sectors that are still playing catch up. However, what is not talked about as often in the industrial arena is the rapidly emerging subcategory of flex development — the combination of heavier office space with industrial warehousing, which has arguably been on par with the demand of standard industrial product.

Flex is a popular choice for tenants who want more control over their space, since they have 100% accessibility and usually do not have to share common areas with other tenants. In many cases, as little as 10-20% of the building is for traditional industrial use while the rest is office or conditioned open work areas. E-commerce users have taken over the flex sector as it has continued to rise in popularity. In Metro Atlanta, we are seeing a large number of small logistical and manufacturing groups seeking flex industrial space, along with local distribution companies and specialized contractors.

"I would argue that flex is one of the strongest sectors in Metro Atlanta right now, and while some groups are cautious about the impact of a recession, flex will remain a resilient and desirable asset class," says SKCR Senior Associate Land Wright. "As more employers configure their work-from-home plans and seek a return to office, we'll continue to see interest in these types of multi-functional spaces for a variety of businesses. SKCR is certainly confident in flex's continued popularity and the growing need for new development to keep up with demand."

In the greater Atlanta market, absorption remains strong and vacancy stays low for flex thanks to a continued supply-demand imbalance that shows no sign of balancing anytime soon. Flex space is so hot, in fact, that typically as soon as a property hits the market, it's immediately gone. Developers continue to set their sights on big- box industrial while flex stays in the shadows, ultimately creating a market that heavily favors the landlord and continues to push rental rates higher as demand surges. At SKCR, we've even had properties become fully leased before they hit the market publicly.

North Fulton is a key submarket for our leasing team, with SKCR's flex listings in the area being fully leased for the past year. We have helped some tenants move out of our buildings during this time, and have been able to re-lease their space before they even vacate the property. In our two most recent transactions within North Fulton, our team was able to use the strong relationships we have with the other owners in the area to secure leases for our clients in spaces that were yet to be listed. In each of these roughly 40,000-square-foot deals, we were able to proactively find our tenants space that met their unique needs despite cutthroat competition.

Atlanta is still one of the best markets for CRE in the country, particularly for flex. Even while traditional office product took a hit after the pandemic, Atlanta has outperformed nearly every other market in the country over the past six months. Companies see Metro Atlanta as affordable with a lot of room for growth and a strong workforce. At SKCR we remain optimistic for the future of Atlanta's CRE market, and anticipate continued demand and growth within flex development. If you are interested in flex space or would like to learn more about SKCR's capabilities within the sector, contact us here.

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