CITY HIGHLIGHT, AUGUST 2007

SAVANNAH CITY HIGHLIGHTS
Jim Bryant & Ashley Bowersox

Savannah Retail Market

With 6.5 million visitors coming to Savannah annually, the market had been significantly underserved from a retail perspective, particularly in downtown, for many years,. But national retailers are beginning to include this market in their broader outlook. In the last few years, gourmet grocer Fresh Market has located on the Southside; steakhouse Ruth’s Chris has taken 15,000 square feet within Ellis Square; and Marc Jacobs has opened up a 4,500- square-foot store on Broughton Street, Savannah’s main retail corridor. The retailer had been eyeing Savannah as a tertiary market for years, and its arrival is seen as a testament to the city’s credibility.

In recent years, a great number of vacant retail spaces have led the Savannah Development Renewal Authority (SDRA) to strive to bring Broughton Street back to its original splendor. The city has successfully seen the development of this area change from wig shops to national retailers, with today’s Broughton Street offering a unique balance of well-known names and local retailers. While average rental rates were $18 per square foot triple-net in downtown up until roughly 4 years ago, current downtown space is fetching $30 per square foot. Retailers including American Apparel, which opened in late 2005, and Athlete’s Foot, which opened in August 2006, are new to Broughton Street, while Gap and Banana Republic opened 6 years ago. On the eatery front, Fuddrucker’s will also be opening a Broughton Street location, while Panera Bread is currently constructing a shop at Broughton and Bull streets, the future location of a FedEx Kinko’s store as well.

One reason for the slow arrival of national retailers to Savannah is the lack of available suitable space for national stores in the downtown. Other than on Broughton Street, no adequate retail space existed downtown until W.B. Barnard Co.’s recent development of News Place on Ellis Square and Wassaw Savannah Development’s Bay Street Plaza, opening up a whole new center for retail commerce in Savannah. The 40,000-square-foot News Place currently has 26,000 square feet of available space as Ruth’s Chris is the major signed tenant occupying 14,000 square feet. The second phase of development of News Place, will add 20,000 square feet of lower-level retail space and upper-level office space scheduled for occupancy in 2009. Across the way, Bay Street Plaza, which is currently ready for tenant upfit, is adding an extra 30,000 square feet of either office or retail space.

News Place has the good fortune of being located directly in front of the Ellis Square parking garage, which is connected by Barnard Street to Broughton Street on relatively small (180 square feet) city blocks. In addition, most of downtown Savannah’s hotels are located on Bay Street, so the new retail environment offers guests a pedestrian-friendly shopping district comparable to the size of a mall.

Outside of downtown, Edens & Avant is planning other retail shopping centers in the Savannah area; while Ambling Construction Company is developing The Savannah River Landing, a mixed-use development; The Goodman Company is creating retail centers in the Pooler region northwest of Savannah; and Kimco Realty is developing a new Publix center on the Southside.

— Jim Bryant is managing director and Ashley Bowersox is associate advisor in the Savannah, Georgia office of Sperry Van Ness.

Savannah Office Market

Office development remains conservative in the Savannah market, with only two large-scale buildings brought on line in the last 2 years. The shell of The Mulberry Building, approximately 54,000 square feet of Class A space, was completed in 2006 by The Foxfield Company and remains half vacant with three current tenants. The property is located at Godley Station in the Westside submarket, roughly 10 miles northwest of Savannah near the Savannah-Hilton Head International Airport. The SEDA Building, a 40,000-square-foot, four-story structure on Hutchinson Island across from downtown Savannah, remains three-quarters empty with its developer, the Savannah Economic Development Authority (SEDA), as the sole tenant. In addition, Development Associates is constructing a 42,000-square-foot office building in the Savannah Park of Commerce, and the shell is slated for completion within the next 4 months.

Bordered by ocean and replete with rivers, Savannah is geographically limited in growth by significant marshland and lowland acres throughout the area. As a result, much of the market’s recent development has been taking place in the Westside submarket, in such regions as Pooler and other areas along the Interstate 95 corridor, which constitutes the western boundary of downtown. Most of the city’s developers are local individuals, including Michael J. Kistler of Development Associates, Harry Kitchens of The Foxfield Company and Jack Hall Construction.

The Westside holds most of Savannah’s available land but is only 83 percent occupied, as compared to the Southside’s nearly 94 percent occupancy level. However, some construction is also taking place in the Southside, with a 30,000 to 40,000-square-foot office building ready for occupancy in Richmond Hill, a bedroom community 15 miles south of Savannah. In addition, Ambling Construction Co. is developing a 150,000-square-foot office project downtown, slated for completion in 2010, that will represent the continuation of Savannah River Landing, the city’s historic district.

While the downtown submarket is well developed, one factor suppressing occupancy levels in the central business district is limited available parking. In the past, the city had erected exterior parking garages and set up shuttles to the central business district, which had been working rather favorably, but parking remains the biggest complaint of tenants seeking downtown space. In response, the city is building an underground parking garage aimed at offering 1,077 new parking spaces downtown. The garage is expected to open mid-2008 in the Ellis Square Project — one of the original six squares that General Oglethorpe had slated for the settlement of Savannah — and will be located directly adjacent to City Market, two blocks from City Hall. In the meantime, downtown Savannah is considered a stable submarket with an 85 percent occupancy level.

Many landlords are shy about speculative office space as rents have remained flat during the last decade or so, holding steady at $18 to $24 per square foot even for full-service Class A space in the newer buildings. As of July, average rents in Savannah’s three submarkets weigh in at $19.38 per square foot in the Southside, $19.74 per square foot downtown and $20.30 per square foot in the Westside.

— Jim Bryant is managing director and Ashley Bowersox is associate advisor in the Savannah, Georgia office of Sperry Van Ness.


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