REBusinessOnline

Historically Low Vacancy, Port Growth Drive Savannah’s Industrial Development

Source: Colliers International

Though Savannah by all standards is a small industrial market, you would never know it from the activity in the area. At 57 million square feet, the port city is poised to add an astounding 9.75 million square feet of inventory by mid-2019. The force behind all of this growth is attributed to one key factor: The Georgia Ports Authority (GPA).

The GPA is an economic giant in Georgia supporting one of every 11 jobs in the state and accounting for 8 percent of its GDP. Home to the largest single-container terminal in North America, GPA moved more than 4.2 million TEUs (20-foot equivalent units) in fiscal year 2018, an 8 percent increase over 2017 and an all-time record for the port.

Hilary Shipley, Colliers International

With both CSX and Norfolk Southern on terminal, GPA also handled a record 435,000 rail lifts in FY 2018, which was a 16.1 percent increase over 2017. As the fastest growing port in the country, one might be concerned about congestion becoming an issue for the port, but reinvestment remains a top priority. The GPA recently opened its second inland port to move more containers toward population centers via CSX rail.

It doesn’t hurt either that Savannah, geographically speaking, is at a logistical advantage to many of its East Coast competitors. As one of the most western points on the Eastern Seaboard, containers are able to stay on ships longer calling on the port. Once off the ship, trucks have a six-mile drive to Interstate 95 and about nine miles to Interstate 16, with access to Atlanta, Charlotte and Orlando within a four-hour drive time. With proximity like this, it’s no wonder the industrial world has taken notice.

As the port continues to grow, so does demand for industrial space within close proximity. In the second quarter, Colliers International reported a vacancy rate of 0.58 percent — the lowest the market has seen to date. With this dual combination of port growth and lack of available space, developers have taken action.

Development, Investment Up
As noted, nearly 10 million square feet is currently under construction. Approximately 4.5 million square feet of that is build-to-suit and the balance is speculative. Market veterans such as Duke Realty, CenterPoint Properties and Scannell Properties are all expanding their portfolios in the market. Duke Realty purchased a 65-acre tract for future development, CenterPoint is going vertical on new spec space and Scannell has both spec and build-to-suit projects underway.

Current conditions have also attracted a flurry of new investors with groups like MDH, CTR (Crane Transportation Realty), Capital Development Partners, Chesterfield, Rooker (with Solution Property Group), McCraney and PNK all developing buildings within 10 miles of the port. Chesterfield has begun construction on a 1.2 million-square-foot development project for JLA Home. This is JLA’s second development over 1 million square feet in three years.

With nearly no available existing space on the market, and many of the projects under construction delivering late 2018 or early 2019, there have been a limited number of leasing transactions. Duke Realty leased 322,500 square feet to Home Furniture International, which is new to the Savannah market in mid-August. Keen Transport expanded its Savannah footprint by leasing 157,500 square feet from Sentinel in June. Additionally, Floor & Décor moved into its new 1.4 million-square-foot facility that was developed by Duke Realty.

Investors are also on the hunt for Savannah properties and recent cap rates reflect the market’s strength. In June, GCP bought Duke Realty’s 150 Portside Court. The building spans 800,000 square feet and is occupied by Home Depot. The facility traded at a 5.25 percent cap rate.

Earlier in the year, CRG sold its two buildings, both of which are occupied by Shaw Industries. Its 1 million-square-foot building sold to Griffin Capital Essential Asset REIT at a 5.9 percent cap rate and its 831,764-square-foot building sold to Monmouth Real Estate at a 5.75 percent cap rate.

Between existing market tenants discussing expanding and big name newcomers circling, 2019 is guaranteed to be an interesting one for the Savannah market.

Ultimately, how quickly the market can absorb the roughly 5.5 million square feet of spec slated for delivery will determine the next wave of development. But if the port continues to expand at the rate it has, the Savannah industrial market won’t be too far behind it.

— By Hilary Shipley, Associate, Colliers International. This article originally appeared in the October 2018 issue of Southeast Real Estate Business.

Get more news delivered to your inbox. Subscribe to France Media's e-newsletters. Click here.



Related News

Conferences