Developers and logistics operators are scrambling to meet the demand for warehouse and distribution space to process and store the record amounts of cargo delivered daily to the Port of Savannah. The shortage of warehouse space is driving up rents and prompting much-needed speculative building.
While not in agreement on the exact numbers, both Colliers International and Cushman &Wakefield – two major global commercial real estate companies — concur that the Savannah area industrial vacancy rate is too low for comfort.
Both companies released their mid-2017 industrial market reports last week, with indications that the demand for space around the ports is not slowing. If anything, it’s putting increased pressure on the market.
According to Colliers, total industrial inventory for the Savannah market at the end of June was 50.9 million square feet, with 5.2 million square feet under construction and only 999,000 square feet vacant.
“The industrial vacancy rate dropped to 1.96 percent in the last quarter, reminiscent of the all-time low of 1.93 percent recent this time last year,” said David Sink, a principal in Colliers’ Savannah office.
Sink noted that the drop came despite having considerably more square footage currently under construction compared to the same quarter last year.
Bulk vacancy rates (representing properties of 100,000 square feet or more) were higher at 2.4 percent than their record low of 1 percent this time last year, but remained critically low and relatively unchanged from the first quarter of 2017.
Cushman &Wakefield reported an overall industrial vacancy rate of 3.2 percent for the first half of the year, nearly a percentage point higher than the same period last year.
“The below-average vacancy rate can be attributed to another record-breaking year of throughput and expansion at the Georgia Ports Authority,” said Stephen Ezelle of Cushman &Wakefield in Savannah.
Even with 1 million square feet of new construction delivered in the first half of 2017- mostly build-to-suit projects in the 150,000-500,000-square-foot range — the market continues to maintain a vacancy rate well below equilibrium, he said.
Of the more than 5 million square feet currently under construction, Ezelle expects most of it will be fully lease before it’s finished.
“Market demand will continue to outpace delivery of speculative product as new tenants continue to enter the market and the port increases throughput,” he said.