CITY HIGHLIGHT, AUGUST 2008

SAVANNAH CITY HIGHLIGHTS
Jim Bryant & Ashley Bowersox

Savannah Office Market

The Savannah office market continues its steady path. Rents have remained relatively flat during the past 10 years. There is very little speculative office space in the pipeline and only two buildings in excess of 40,000 square feet have been developed in the past 2 years. Additionally, percent of occupancy ranges from the high-70s to mid-90s.

Most office developers have been leery of Savannah because of lack of rent growth. Rents of office space, including full-service Class A space in the newer buildings, have ranged from $18 to $24.50 per square foot. As of year-end 2007, the average rents in Savannah’s three submarkets were slightly up, weighing in at $20.87 per square foot in the Southside, $20.11 per square foot downtown and $21.15 per square foot in the Westside. A year ago, averages were $19.38 per square foot in the Southside, $19.74 per square foot downtown and $20.30 per square foot in the Westside.

The three most prominent office developments — the Mulberry building, the SEDA building and a building by Development Associates — continue to have trouble finding tenants. The Mulberry building, a 54,000-square-foot, Class A office building developed by The Foxfield Company in 2006, currently has 11,000 square feet available for lease. The SEDA building, a 40,000-square-foot, four-story structure on Hutchinson Island across from downtown Savannah, remains only 25 percent occupied with the developer, Savannah Economic Development Authority, as the only tenant. While Development Associates’ 42,000-square-foot office building on the Westside has 16,000 square feet of available space, they recently announced that they are developing an additional 2-story building adjacent to the existing property that will comprise approximately 29,000 square feet, 11,000 square feet of which has been pre-leased to a Fortune 500 company.

The Westside continues to have the most available land but is only 79 percent occupied, down from 83 percent a year ago. This is due to the addition of the Friedman’s Jeweler’s building becoming available in a market that currently has 60,000 square feet of vacant space.

The Southside continues to be the strongest sector with occupancies steady at 95 percent.

The downtown submarket occupancies are at 85 percent. One factor that has suppressed occupancy levels in the central business district is limited available parking. In response, the city is completing an underground parking garage aimed at offering 1,077 new parking spaces downtown. The garage is slated to open late this summer 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. Additionally in the central business district, Ambling Development is developing a 54-acre mixed-use property that will offer approximately 200,000 square feet of office space. The downtown project, which is slated for completion in 2010, will represent the continuation of the Savannah River Walk and the city’s historic district.

— Jim Bryant is with Savannah, Georgia-based Sperry Van Ness GASC.

Savannah Retail Market

The outlook for Savannah retail is extremely bright. Long overlooked as a destination for national retailers, Savannah has finally come into its own. In the past, when retailers have taken a “paint by numbers” approach, Savannah’s demographics just never made the grade. But now, the right retailers have visited and seen firsthand the true nature of Savannah as a retail destination. Geography, tourism, the Savannah College of Art and Design and the city’s rich, history is what makes Savannah so different from her demographics.

Savannah has an metropolitan area of 320,000 people. At first glance, this is too small for some retailers, but that is only part of the picture. Tourism plays a large role in Savannah’s average daily traffic count. More than 7 million visitors make Savannah their destination throughout the year. Combine this with 46,000 university students in the region claiming Savannah as their geographic center, and it begins to show a truer picture of the retail climate. When you combine a student population that is both well-versed in fashion and design and integrated into the city itself, you get a greater population that is more appreciative of the arts.

Broughton Street is the main retail street in downtown Savannah. Marc Jacobs recently opened a store at the western end of Broughton. From there, every block has a national retailer with the likes of American Apparel, Vera Wang, Gap and Banana Republic. Urban Outfitters is scheduled to move into the area in October or November. Each of these national retailers is an anchor surrounded by high-end local boutiques such as BleuBelle Boutique, Mint Boutique, James Gunn, J. Parker Limited, and the regionally-based Copper Penny.

This combination of national, local and regional retailers creates a high fashion destination that is quickly becoming like a Southern Rodeo Drive. Broughton Street is only part of the canvas; two new developments of monumental proportion await their spotlight at the eastern end of Broughton Street.

Savannah River Landing is a 54-acre planned development designed to be a continuation of downtown along the Savannah River. Forum Development Group is developing the 250,000 square feet of retail space that will include more than 50 shops and restaurants of local, regional and national origin, catering to a more couture experience. The retail is located on the ground floor of the many multi-storied buildings. This configuration will ensure a vibrant street experience. But the development is much more than a lifestyle center. It combines every aspect of a thriving downtown area in a new, distinctly Southern venue. The first retail stores are expected to debut in Spring 2010.

On the other side of the President Street Extension is another very important development that is much more retail-oriented. Madison Retail is planning to develop a monumentally proportioned 500,000 to 850,000-square-foot multi-anchored mixed-use project. The project is significant in that, combined with the new presence of Savannah River Landing, it creates a new gateway into downtown Savannah from the islands and other points east. Working with city officials, the developers are proposing to redesign the President Street Extension from a DOT-styled barren landscape to a pedestrian friendly, tree-lined artery that can both accommodate the high volume of vehicular and pedestrian traffic and the possible extension of the River Streetcar, Savannah’s renewed Streetcar project.

One of the major hurdles that has plagued Savannah’s downtown market is the perceived parking issue. The city is about to open the Ellis Square parking garage, which will encompass 1,085 parking spaces underground, allowing for the original Ellis Square to return after a 100-year absence. The square’s return creates a link among Savannah, Broughton, Bay and River streets. Linking these major destinations within downtown will restore a more cohesive nature to Savannah, one of the most compelling pedestrian cities in America.

— Ashley Bowersox is with Savannah, Georgia-based Sperry Van Ness GASC.

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