Savannah’s overall vacancy rate for warehouses, distribution centers and similar industrial buildings continued its steady decline in 2013, ending the year much closer to pre-recession levels.
The industrial real estate market’s vacancy dropped to 9 percent at the end of 2013, down from 12 percent in 2012, according to an annual market report prepared by local commercial real estate firm Colliers International.
This marks a recovery from the market’s lowest point in 2010 when vacancy was at its highest, 21.4 percent, and brings it closer to the U.S. national rate of 8.36 percent.
“It’s moving in the right direction,” said David Sink with Colliers International.
The report cites consistent growth of the Georgia Ports Authority, the fourth largest container port in the country, as well as the absorption of existing industrial space for the market’s positive performance.
“When you have new companies coming in and companies already here expanding — virtually with no new construction — all those factors collectively have gone into pretty quickly bringing the vacancy rate down,” said Sink.
Of Savannah’s approximately 45.3 million square feet of industrial space, about 4.1 million square feet remain available, which Sink predicts will continue to shrink without any major speculative construction on the horizon.
“We’ll see the continued absorption of the existing space, and we’ll probably see some build-to-suit construction,” said Sink of 2014.
Of the companies who signed leases last year, several were new to the market, including Hankook Tire, St. George Warehouse, logistics provider Neovia and carpet manufacturer Shaw Industries.
According to the report, 2013 also saw the return of large industrial building sales with six 100,000-plus square-foot spaces sold. A few of those include Tradeport Savannah, which made an investment purchase of 385,000 square feet in the Tradeport center in Liberty County, and Safevieh Rugs, which bought 257,250 square feet in the same complex.
As far as construction activity, Gulfstream Aerospace continued its expansion around the airport, with 450,000 square feet of new construction, and plans to break ground this month on a new 400,000-square-foot product distribution center.
“It was another pretty solid end to the year,” said Chris Brown, senior vice president of the southeast for Duke Realty, the largest commercial real estate holder in the Savannah area at about 7 million square feet.
Brown said Savannah was now using up its “first generation product,” i.e. those warehouses and centers built before the recession, and was now mostly dealing with re-leasing of existing space.
“It was pretty slow in the first half, but there were some nice deals in the last six months,” said Brown, whose company renewed a lease with Home Depot for 800,000 square feet and leased out part of another building in the Westport Business Park on Dean Forest Road to logistics newcomer Neovia.
“It was a lengthier comeback than we had hoped for,” said Brown of the recovery. “I would say Atlanta and Savannah were slower coming back than most of the industrial markets.”
Despite the slow recovery, Brown said, the Savannah area should be poised for a good year.
“There’s a few more deals in the market that will be made in the first quarter that will continue the momentum,” said Brown. “If we have another good year like this one, there will definitely be some construction coming back.”
BREAKOUT
INDUSTRIAL MARKET HIGHLIGHTS
Vacancy rates for Savannah market since the recession:
2008 … 12.62%
2009 … 18.35%
2010 … 18.57%
2011 … 14.31%
2012 … 11.84%
2013 … 9.03%
Six significant sales transactions closed in 2013 in the Savannah warehouse and manufacturing sector:
NAME ...... PROPERTY...... SQUARE FEET
Tradeport Savannah ... Jimmy DeLoach Blvd. … 385,000
Safavieh Rugs … Jimmy DeLoach Blvd. … 257,250
Georgia Cold Storage … SPA Industrial Park … 176,000
H.G. Realty … SPA Industrial Park … 129,000
KPC Port Partners, LLC … Crossroads Expansion … 125,400
Halstead New England … Effingham Industrial Park … 112,000
Source: Colliers International