Warehouse and distribution center space is filling up again in the five-county Savannah area, another indication that economic growth has begun.
“Overall vacancy in the Savannah industrial real estate market continues to decline as demand increases and minimal new supply has been added to the market,” said David Sink, a principal at Colliers International-Savannah LLC.
At mid-year 2014, the vacancy rate had dropped to 7 percent, as compared to 12.5 percent this time last year and 18.5 percent at the end of 2010.
Total net absorption in the second quarter exploded to nearly 800,000 square feet, bringing the two-quarter year-to-date total to almost 880,000 square feet.
“As a result, rental rates are beginning to increase and landlords are pushing for longer-term commitments,” Sink said.
“And we’re starting to see speculative building, something we simply haven’t seen since 2008.”
According to Colliers’ current industrial market report for Savannah, there is currently 988,000 square feet under construction, with 570,000 square feet of that being built for clients and the remaining 400,000-plus built as spec.
“This is almost exclusively geared toward smaller tenants in the 10,000- to 50,000-square-foot range,” he said.
As for larger warehouse construction, Sink said several developers with land are contemplating spec projects over 100,000 square feet in anticipation of a coming shortage of quality bulk buildings.
“The institutional development is already in place as a result of steady, ongoing growth at the ports,” he said. “Now warehouse space is filling up again in response to an economy that’s getting
healthier.”
Indeed, Georgia Ports Association just reported its best container month ever, surpassing pre-recession numbers.
“The continued growth of our ports is reflected in the very low vacancy rate for distribution space within the area,” said Curtis Foltz, GPA executive director.
“These are very exciting times for our business, and there is a great opportunity for new development in this space currently.
“All this activity is about growing jobs and further economic growth in the region.”
Trip Tollison, president and CEO of the Savannah Economic Development Authority, agreed.
“SEDA is excited that the warehouse and distribution vacancy rates are at pre-recession levels. The good news is we have thousands of acres that are fully entitled and ready for industrial development in the region,” he said.
“We believe more development is coming, especially as it relates to the Port of Savannah.”
Savannah’s market is certainly unique, Sink said.
“With more than 4,000 acres of land — spread out among Chatham, Effingham, Bryan and Liberty counties in Georgia and Jasper County in South Carolina — the area is very well positioned for additional development, whether it’s speculative or build-to-suit,” he said.
“And that’s just the land that is already fully entitled. It doesn’t take into account property that may be zoned and cleared, for example, but isn’t completely ready for building.”
All of the “shovel ready” 4,000-plus acres have conceptual plans, identifying potential buildings and wetlands areas, Sink said.
“From what we see, this has the potential to accommodate more than 34 million square feet in addition to the market’s existing 45 million square feet,” he said.
New companies recently entering the market include Floor & Décor, Hankook Tire and Shaw Industries.
Caesarstone, a manufacturer of quartz surfaces, has a $100 million, 265-square-foot under construction at Belfast Commerce Centre in Bryan County, and Gulfstream continues to expand in Chatham County, Sink said.
BY THE NUMBERS
Savannah area mid-2014 Industrial Market Report
Total inventory 45,302,300 square feet
Under construction 988,000 square feet
Net absorption* 796,360 square feet
Vacant space 3,213,939 square feet
Vacancy rate 7.09 percent
• Net absorption is the amount of space occupied at the end of a period – in this case, 2Q 2014 – minus the amount occupied at the beginning of the period, taking into account space vacated as well as newly built space.