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When California-based OA Logistics first looked at expanding to the East Coast in 2009, Savannah had a lot of large industrial buildings available, said OA chief operating officer Rodney Dickey.
When the company came back last year, looking to add significantly to its 679,000-square-foot presence here, Dickey encountered a different landscape.
“We need slightly more than a million square feet with the potential to add another million,” Dickey said last week in announcing a major expansion here. “So we’re in the process of looking for a site on which to build.”
Dickey’s dilemma has become more the norm than the exception, according to property consultant David Sink, a principal at Colliers International in Savannah.
“At the end of 2009, the industrial vacancy rate in the Savannah market — which encompasses Chatham, Bryan, Liberty and Effingham counties in Georgia and Jasper County in South Carolina — was a whopping 18.6 percent,” Sink said.
“By the end of last year, that rate had dropped to 5.4 percent, the lowest it’s been since 2006.
“At Colliers, we track everything over 50,000 square feet, and we’re quickly running out of space,” he said.
For example, Colliers currently has 11 available properties of 50,000 square feet or more.
“In mid-2010, when the market was at its worst, we had 35 large properties available with a 21 percent vacancy rate,” Sink said. “With a total market footprint of 43.5 million square feet, that means close to 7 million square feet have been absorbed since then.”
Factors for the turnaround, Sink said, include a growing economy, subsequent growth at the ports and a pendulum swing from export-dominant cargo to more imports.
“We have the busiest port in the country,” he said. “And as imports come back — especially retail imports — the demand for warehouse and distribution center space grows.”
Major delays at the biggest ports on the West Coast also have created additional demand.
“We just did a 184,000-square-foot lease that’s directly related to diversion of cargo from the West Coast,” he said.
Overall, the growth in demand and the rapid absorption of available properties has thrust the Savannah-area industrial market back into a build-to-suit and speculative construction cycle, Sink said.
Speculative construction — building in anticipation of need rather than for a specific client — is a phrase that hasn’t been in his vocabulary in the last five years, he said.
“Now CenterPoint Intermodal in Savannah is about to break ground on a 315,000-square-foot speculative building in their park off Dean Forest and there are two or three other developers who are seriously considering spec projects,” he said.
Going forward, Sink said, one of the real positives for the Savannah market right now is the amount of fully entitled industrial land that is available.
Fully entitled land is basically ready for a build, with zoning and utilities in industrial quantities already in place.
“In Jasper, you’ve got Riverport. In Chatham, we have Morgan Center, CenterPoint, Northport,” he said. “Bryan County has Interstate Centre on I-16 and Belfast on I-95. Liberty County has Trade Port East and Effingham has their industrial park north of Rincon. By my count, we have some 4,000 upland acres of fully entitled industrial property, capable of accommodating 36 million square feet.”
There also is significant acreage available on the “megasite” in Chatham County, a fully entitled industrial site that is owned and marketed by the state.
Numbers don’t lie, but they can be deceiving.
That’s commercial Realtor Ashley Smith’s message regarding the Savannah office market.
Office rental rates remain relatively flat at $19.63 per square foot, with a vacancy rate of 17.4 percent, down from 18.3 percent in 2013, and a net absorption of 8,900 square feet, he said.
“All of that looks pretty unimpressive,” said Smith, a principle at Colliers International in Savannah. “But if it were not for just a few properties, the numbers would be much better.”
For example, Savannah Crossing on Abercorn Extension, which housed a large call center, is now empty, with 68,000 square feet bank-owned and vacant, Smith said.
“To lose that much square footage and remain positive on the absorption side, you know there are some bright spots and success stories,” he said.
One of those success stories is the Realty Building downtown, which absorbed more than 14,000 square feet, going from 45 percent occupied to almost 90 percent occupied.
“What that tells us is that people still want to be downtown,” Smith said. Altogether, downtown absorbed 9,000 square feet last year, most of it Class A office space.
“Other bright stars include the Chatham Parkway corridor, which is really growing, and Pooler, where the Mulberry office building alone absorbed 19,000 square feet.
“On the southside, 400 Mall Boulevard absorbed 16,000 square feet, and the recent purchase of the Spiva property on Abercorn Extension by Dan Vaden will also help, as I believe they are planning to use it as office space. That’s why saying the numbers don’t lie doesn’t really tell the story.
“If you take out a couple of big outliers, you’ll find a strong and stable market,” he said.