A Look at One of the Fastest Growing Industrial Markets

In recent years, developers have been drawn into a landrush of sorts with intense competition for suitable industrial sites near Georgia’s Port of Savannah. The result has been to flood the market with new inventory that has pushed up vacancy rates – temporarily, at least.

Savannah is the second-largest seaport on the East Coast — the fourth largest in the U.S. — and it serves as the gateway to and from foreign markets for much of the Southeast. It was a major factor in South Korea’s Hyundai Motor Group’s announcement in May 2022 of a plan to build a massive $5.4 billion plant to manufacture electric vehicles within a few miles of the port. The decision intensified the landrush, as the company’s many South Korean and other suppliers hunted land for new plants and developers got busy building warehouses nearby.

By 3Q 2023, the vacancy rate and absorption for industrial real estate remained strong and steady, Colliers reported. In 4Q 2023, however, vacancy rates rose. In a new report, Colliers attributed the rise to new supply following the completion of multiple speculative buildings. However, it expected a slump in new construction starts in 2023 to allow the excess supply to be absorbed, with vacancies stabilizing later this year.

“Over 13.8 million square feet of new construction has been leased in 2023, of which 9 million square feet was spec and 4.8 million square feet was built-to-suit,” said David Sink, Colliers’ Principal in Savannah. “This amount of absorption, as a percentage of total inventory (118 million square feet as of Q3), will once again make Savannah one of the top growth markets in the U.S.”

Colliers cited the Port of Savannah’s extensive rail and truck network and its direct shipping access to over 800 ports in 160 countries as reasons for its success. According to the Georgia Ports Authority (GPA), which operates the port, it has invested $374 million to create the largest ondock rail facility in the Western Hemisphere. It is also constructing a number of inland ports to enable goods to be transported efficiently by train, instead of on busy highways. It has also invested heavily in improvements at the port, like larger berth capacity and new ship-to-shore cranes.

The port handled 4.9 million TEUs in 2023 — 16% fewer than in 2022. The GPA blamed the decline on high inflation and interest rates that slowed consumer spending and caused a buildup of inventories in warehouses. Nevertheless, it said renewed signs of strength in container volumes have appeared this year, bringing hope for more favorable outcomes in the next six months.