Although certain regions of the nation continue to show signs of economic slowdown, Savannah, Georgia, shows overall stability in the economic and commercial real estate sectors. There has been increased growth within Savannah's commercial real estate market for the last 10 years, with the strongest growth occurring in the last five. This growth has occurred largely to meet demand -- very little speculative product has been constructed in Savannah during the last few years. Therefore, Savannah has not seen the oversupply of product that has occurred in a number of first and second tier cities.

Sustained infrastructure development during the last 5 years, especially in the Westside area of Savannah, is largely responsible for growth in the region. Additional factors have contributed to Savannah's growth, including the continued expansion of the Georgia Port in Savannah, the increased visibility of the city's historic district and the increased attraction of the city as a tourist destination and convention center.

With regard to the hospitality industry, "Savannah has not experienced the harsh effects of the recession or the effects of 9/11 as have some other cities," states Bill Hubbard, CEO of the Savannah Area Chamber of Commerce. "Our tourism industry remains stable largely because local flight schedules haven't changed and Savannah is an 'easy drive' for a majority of tourists. We are very much impacted by our close proximity to the I-95 corridor and the 'snowbird' traffic."

Hubbard admits that hiring is down 10 to 15 percent within the manufacturing sector, but only slight pessimism exists about the local economy. He predicts that Savannah will experience a strong economic surge by mid-2002. He is also very optimistic about Savannah's new Maritime Trade Center on Hutchinson Island, which consists of 350,000 square feet of meeting and conference space.

Historic District

National retailers discovered downtown Savannah and historic Broughton Street in 2000 and 2001. "The Gap and Banana Republic have legitimized downtown Savannah and historic Broughton Street," according to Bridget Lidy of the Savannah Downtown Renewal Authority. "Many smaller and even local businesses have opened and continue to show strong interest in locating within the Broughton Street corridor."

Retail businesses are also attracted by the infusion of public sector investment dollars. These dollars have resulted in the renovation of faïades and interiors in many buildings along the Broughton Street corridor. As a result of enhanced investment, assessed property values in the redevelopment area have increased dramatically. Another reason for increased interest by retailers is the continued development of residential units within the downtown corridor and along Broughton Street. At the end of 2001, approximately 50 loft apartments had been developed on Broughton Street.

The Morgan Building is one of the newest mixed-use developments to occur along the Martin Luther King Jr. corridor and consists of four bays of 5,280 square feet on two floors. According to Cliff Dales of Neely/Dales Real Estate, "One bay has been leased to a furniture company and very strong interest has been generated from law firms, art galleries and consulting companies."

"The hotels along the MLK Jr. corridor accounted for the majority of the $33 million in investment dollars during 2000," says Aubrey Thagard, development specialist with the Savannah Downtown Renewal Authority. "Even though investment dollars totaled only in the $6 million range for 2001, that number accounted for 27 new businesses, and we remain optimistic about the continued development south of MLK Jr. Boulevard past the terminus of Interstate 16. I believe that the corridor will continue to develop because of the emerging high-end housing opportunities as well as the existing housing in the area."

Dales credits the city's streetscape improvements, such as new sidewalks, lighting and landscaping, for helping to attract new business opportunities to the area.

Savannah's Emerging Commercial and Retail Sector

Savannah's emerging commercial growth corridor continues to be the Westside of Savannah from Godley Station at the Savannah International Airport to Highway 17 near the Abercorn Street Extension. Abercorn Street is the central corridor of Savannah, stretching from the riverfront to Bryan County. Lack of available land along Abercorn Street has caused developers to consider other opportunities for development. Commercial developers are also taking note of the increased growth of the residential communities on the Westside as well as the new infrastructure of roads and utilities.

The newly developed residential communities at Godley Station, in the Pooler Parkway corridor, have accounted for the majority of residential home sales for the area. Absorption of homes at the Villages at Godley Station exceeds 200 units per year. There are presently 380 apartment units occupied at Godley Station; an additional 300 apartments will be under construction by mid-year. Phase III will commence in 2003 with 320 units.

Harry Kitchen, president of Foxfield Development Company, has been a strong advocate of Godley Station. "Godley Station is a natural," according to Kitchen, who has recently contracted to sell 94 acres at Town Center West for retail use. "I think that this area is one of the most unique retail sites in the Southeast United States," he says. He reasons that Branigar/IP Realty's expertise as master developer was the key component to the success of the development. Other components that have helped in achieving recognition of the interchange include heavy exposure along the highly traveled Interstate 95 corridor and the newly implemented infrastructure of the Pooler Parkway corridor. Kitchen also notes that many major retailers lack representation in the Savannah region, and Godley Station "just naturally fits" for the right location. Town Center East and Town Center West can accommodate up to 1.5 million square feet of retail.

The Highway 17 corridor, also on Savannah's Westside, is gaining significant attention as an emerging residential and commercial sector of the county. The Department of Transportation is nearing completion on the first phase of its road-widening project that will expand Highway 17 to four lanes. Super Wal-Mart opened a few months ago near the intersection of highways 17 and 204.

Just a short distance from the Highway 17 Wal-Mart, Branigar/IP Realty recently opened Berwick Plantation, a mixed-use development with single-family and multifamily homes, as well as neighborhood shopping. This 1,900-acre planned community includes an 80-acre tract of commercial land that includes 1.2 miles of frontage along the four-lane Highway 17. Several of Savannah's leading residential builders have purchased land at Berwick with development to begin in the spring. The commercial tract will be called The Exchange at Berwick.

RealtiCorp sees Savannah as an emerging opportunity for development. According to David Grubbs, regional partner in RealtiCorp's Charleston office, "Our research indicates that there will continue to be substantial opportunity in the greater Savannah area. In particular, we are watching the Westside. With the infrastructure improvements to Highway 17, as well as Pooler Parkway, many national retailers are excited about expanding into these areas with the anticipation of having the success they enjoy on Abercorn Street."

Office and Industrial

Peggy Jolley, vice president of the Savannah Economic Development Authority, has seen a downturn in the number of business and industrial inquiries coming into the development authority. She calls the downturn a reflection of the overall national economy, but she remains optimistic about 2002. Of significant interest is the development of high-tech entrepreneurial businesses in the region, which could result in significant job growth and increased demand for office space in the area, according to Jolley. She is also seeing more executive decisions resulting in the "decentralization" of locations for office and some manufacturing distribution centers. She also cites the Savannah International Airport as an advantage in attracting new businesses.

The Westside offers the strongest attraction for office tenants and developers because of easy access to all of the major traffic corridors, adjacent new residential developments and new retail corridors. The $150 million Georgia Technology campus at Crossroads Business Center will spur the development of a new regional office market. The Savannah Economic Development Authority recently broke ground on the 165-acre Technology Campus, which will house the engineering school of the Georgia Institute of Technology (Georgia Tech). The resulting jobs and need for living accommodations should generate significant office, retail and housing growth for the surrounding area. According to Jolley, Georgia Tech has forecast a need for approximately 350,000 square feet of classroom space within the next 10 years.

Also, construction is underway at Crossroads Business Park. "Activity is back," says Dick Knowlton, recently retired CEO of the Savannah Economic Development Authority and president of White Branch Properties, LLC. He remains bullish on Savannah, especially at Crossroads Business Park. It was during his tenure at the Development Authority that Crossroads became one of the premier business parks in the Southeast, attracting The Home Depot, Dollar Tree and others.

Knowlton states that his new company will begin development of an office park at Crossroads and a smaller park located on Grange Road adjacent to the Port of Savannah. "The users of these buildings will be clients supporting the new Technology Campus or the Port of Savannah," says Knowlton.

Crossroads was Knowlton's main focus while he was at the Development Authority. Now, however, Knowlton's White Branch consulting business is pursuing other areas of interest. "One of the most interesting commercial mixed-use projects expected to begin in 2002 is a public/private development at Armstrong Atlantic State University. The project encompasses 25 prime acres on Abercorn Street," says Knowlton.

The Savannah office market consists of approximately 1.45 million square feet located in approximately 33 significant buildings. There is approximately 600,000 square feet of Class A and B space within the central business district (CBD) and approximately 850,000 square feet in the Southside and Westside sectors.

The occupancy rate of the three sectors is 91 percent. Fourth quarter 2001 statistics showed that the occupancy rate in the CBD decreased from 94.4 percent in 2000 to 87.8 percent. The increased vacancy is directly attributable to the slowdown of certain manufacturing sectors within the Savannah economy as well as the national economy. Another reason for the higher vacancy within the CBD is increased parking costs in the district. The CBD also lacks available land, thereby making efficient construction of office space within the district a formidable task.

The 95.24 percent occupancy rate on the Southside has remained stable since 2000. Rental rates on the Southside range from $14 to $22 psf for full service leases. Lack of available land on the Southside continues to be a significant factor in maintaining the present rent structures. There is approximately 20,000 square feet of new construction underway on the Southside, predominantly for the smaller office user. The occupancy rate on the Westside is 91.01 percent, down from the year 2000's 96 percent occupancy, and rental rates range from $16 to $18 psf, full service. The majority of new office development is on the Westside with approximately 30,000 square feet under construction.

Although Savannah experienced a slight economic slowdown resulting in rental rate stabilization, Savannah's overall office market remains strong with occupancy rates expected to rise.

Savannah's industrial market continued to expand in 2001. Approximately 1.7 million square feet was either completed last year or is currently under construction. Rodlock Investments remained the most active development entity in the Savannah industrial marketplace with the completion of 540,000 square feet of inventory and it has 750,000 square feet presently under construction.

It is projected that construction in the industrial sector will slow during the first part of this year and vacancy will remain very low. Rental rates are also expected to remain stable throughout the year.

Rhett Mouchet is vice president and broker-in-charge of Colliers Keenan Inc. in Savannah, Georgia. Marian Smith and Lynn Beam of Colliers Keenan also contributed to this article.


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