Savannah Commercial Real Estate: 2010 Review & 2011 Outlook

Time heals all wounds, but how much time is the big question. The bruises of the last few years are still there but, some signs of a turnaround are visible. Here is both a national & local look at 2010 and an outlook for 2011:
Office: National vacancy rates hit a 17 year high, but the 4th quarter was the first time in 3 years more space was leased than vacated. Locally, our office market continues to be soft and like the nation, vacancy rates will remain relatively flat. Limited office leasing produced some moves but few net-new users of any significance. GSA build-to-suits drove development, including Savannah’s first modern-day, Class-A building in the central business district. Slated to open in 2012, 70,000 SF will be constructed facing Ellis Square and house the U.S. Attorney’s office on four of its six floors.

RETAIL: US holiday sales were the best in 4 years. An increase in consumer buying power should lead to modest sales growth in 2011 with discount & grocery retailers benefiting the most. Oglethorpe Mall, nearly fully leased, reported 2010 store sales up slightly compared to a 3-4% decline in 2009. Broughton Street saw mixed results: some store sales were up over last year, but several closings still indicate there is work to be done to invigorate the corridor. Steady tourism improvements also helped increases in tax receipts and hotel occupancies.



photo courtesy of GPA



Industrial: Vacancy rates peaked nationally around 14.1% & should finish 2011 around 13.1%. That’s far better than the near 20% vacancy rate in the Savannah area. Most large deals, including Coastal Logistics Group’s build-to-suit 320,000SF building and JLA Home’s 689,000SF warehouse purchase, were in some way related to the port. No other speculative big-box development is expected with 12-18 months or more of supply. Several smaller user-warehouses traded hands with an abundance of smaller 1500-5000sf lease spaces sitting vacant.

Multi-Family: Due to a slow economy and financing challenges in the single family housing market, the sector that showed real progress is 2010 was multi-family. US vacancy fell to a 2 year low of 6.6 % and rents rose .5%. The sector does lead in foreclosures due to most loans being underwritten at the height of the market. Locally, occupancy was steady if not grew with limited development activity in the Pooler area. Our multi-family developer clients are pursuing projects so, expect more development next year.

Investment: The target for most investment, top-tier markets have seen average asking prices increase. As of 3rd quarter 2010, Moody’s reported apartments led with a 16% increase from the year prior. Office increased 4.4% while Retail and Industrial fell 12% & 4.4% respectively. Look for continued oversees investment as the US is by far the number one choice of foreign real estate investors. Don’t expect that demand to translate into activity in our market except for very few institutional grade properties.

What to expect: Until we start seeing repeated months of 300,000 new jobs a month nationally & strong improvements in the consumer confidence index, the economy has long way to get back to “normal.” Savannah’s infrastructure and relatively low cost of living is ready and able to support all those retirees that want to move here but can’t sell their homes. The commercial market should make some modest strides in 2011 thanks to the port and manufacturing announcements, but it will be slow and steady recovery into 2012.

NAI Savannah Sponsors Economic Webinar:

On January 19th, , NAI Global’s Chief Economist and Wharton School of Business professor, Dr. Peter Linneman, gave his quarterly Global Economic Outlook related to commercial real estate. To get a link to replay the webinar, send an email to: outlook@naisavannah.com.

Rex Benton is a Savannah Commercial Real Estate agent with NAI Savannah, the commercial division of Mopper-Stapen, Realtors and is a contributing columnist for “BiS-Business In Savannah” weekly business publication and is an active CRE blogger. http://www.naisavannah.com/  912-358-5600 Office Space, Retail Space, Industrial Space, Investment Real Estate

Savannah Retail Space: A mixed bag

Walking briskly through Oglethorpe Mall last weekend (I try to avoid it like the H1N1), I had a hard time weaving my way through teens, tennis-dress-clad moms and dodging strollers..

You wouldn't have thought that we were in "the worst of times." The crowd could've been caused by the back to school rush but, since February, the mall has seen a steady increase in traffic.

According to Phillip McConnell, Oglethorpe Mall General Manager, stores are reporting a 3-4% drop in sales from last year. Not sure how last year compared to more booming times, but 3-4% should be pretty favorable compared to other parts of the region & US.

The Southside vacancy rate has been helped by the 32,000 SF hhgreg filling the former

Linen & Things space but, still hovers around 16-18%. Large "Box" space is around $10/SF NNN (tenant pays taxes, insurance & upkeep expenses as well) with smaller spaces in the low-mid $20's/SF NNN.

Downtown / Historic District

Long time downtown retailers, both national & local, have seen a significant drop in sales but, say they have had a recent uptick in activity. Quality restaurants downtown are still doing good overall. As far as new tenant demand, I always get requests for food & service (spas, designers) tenants but, have had very little inquires for hard goods retailers. There are several vacant storefronts but, I think, caused as much by half-bake business models as the economic slow down. Rates on average are around $18-20/SF NNN with a couple exceptions of $30/SF NNN around News Place and the AVIA hotel.

We still have downtown retail development activity.

The July opening of the 9 story Bohemian Hotel, rooftop bar (photo left) & restaurant has been a very busy draw Thurs-Sat night. Springhill Suites Hotel on Oglethorpe St. should open soon. According to the Convention & Visitors Bureau, Hotel Occupancy Rates are only down by 10%.

Something that will "stir" interest in the overlooked east end of Broughton Street, The Melting Pot, opens September 23rd.

It seats 138, plus 1o bar seats &
includes meeting rooms & a hi-def AV/Internet system.

Westside Retail developers have slowed significantly from the boom of the last few years but, are following through with projects that have been funded. Publix on Pooler Parkway opens sometime Q4 '10-Q1 '11. Food Lion is active in the corridor with recent openings in Port Wentworth & Dean Forest road at the new Garden City Town Center(photo below). Walgreens is pursuing sites in the area but, smaller retail tenants (1000-1500sf) that fill strip center space are tougher to come by. Because of that building boom, vacancy rates are around 30-35%. Rates for big box are around $10 NNN smaller spaces range from $14-22/SF NNN.

Across all our markets, Retail Tenants seeking build out improvement money, free rent & other terms are certainly being pursued as landlords try to fill up spaces to stop the bleeding. The next 12-18 months could, unfortunately, still prove to be challenging. My Retail Listings: CLICK ME!

But...there is always a but when it comes to Savannah...we are in an excellent position for when the spicket turns back on, the economic engine of the Ga Ports Authority & military bases and our treasured coast line, combined with our relatively low cost of living, will help us attract (& hopefully capture) business as well as those Mid-West & North-East retirees that will finally be able to sell there homes. Some proof: CNNmoney.com just named Savannah #8 in their Top 25 Places to Retire.


photos courtesy: hhgregg, The Melting Pot, Rex Benton (I stopped off for a drink for research)
Rex Benton is a Savannah Commercial Real Estate Agent for Mopper-Stapen, Realtors. He can be reached at the downtown office of Mopper-Stapen, Realtors at 912-238-0874 or our website. Office, Industrial, Retail & Investment properties for sale or lease.