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Georgia ports works to sate high industrial real estate demand

Georgia ports works to sate high industrial real estate demand

WASHINGTON: Industrial real estate demand around the port of Savannah is so high that the addition of 3.3 million square feet in one year — a 7 percent expansion of total capacity — barely dented the region’s low single-digit vacancy rate, spurring the Georgia Ports Authority this week to sell roughly 500 acres of property for development. The Savannah industrial real estate market is in desperate need, the port authority says, after the area’s vacancy rate was roughly halved last year, according to data from commercial real estate firm Colliers International. The property sale announced Monday not only underscores the demand for logistics properties but shippers’ long-term plans to use Savannah over West Coast and other East Coast ports to access the regional market. “Bottom line: We are seeing a boom,” GPA Executive Director Griff Lynch told JOC.com Tuesday. “As quickly as the warehouse space is coming online, it’s gone. It’s getting sucked up.”

The new 5-million-square-foot development announced Monday is located on five parcels of undeveloped land at the port’s Savannah River International Trade Park. The greenfield site is less than five miles from the port’s Garden City Container Terminal and just 1 mile from Interstate 95, which provides access to Southeast and Midwest markets. The Savannah real estate market has seen a dramatic turnaround in industrial real estate activity since mid-2015, when the GPA’s then-executive director Curtis Foltz publicly sounded the alarm that new construction was not enough to meet the container growth at Garden City. The Savannah market’s 2016 year-end industrial vacancy rate was 2.43 percent, down from 3.04 percent at the end 2015, according to Colliers International. Savannah’s total industrial inventory at the end of 2016 hit 49.7 million square feet and absorbed 3.3 million square feet. “We are back down to 1.93 percent as of today,” Lynch told JOC.com Tuesday. “That’s 50 million square feet total: 2.9 million of that is for build-to-suit, 2.3 million is speculative.”

The market’s diminishing vacancy rate is due in large part to Asia import growth through Savannah, which is outpacing average growth rates on both the East and West coasts. That traffic rocketed up during the fallout from West Coast labor unrest in the fall of 2014 and winter of 2015. According to the port, however, record-breaking throughput at Garden City, well after the West Coast disruption dissipated, is a clear sign that shippers are looking at the Georgia port not just as an alternative gateway when other ports are congested, but as a permanent route for inbound goods. “E-commerce is driving a lot of it and the want to be closer to the marketplace, which in our case might be Atlanta or Memphis,” said Lynch. “It’s an alternative to the West Coast. The old way of doing business, it just doesn’t work.”

Savannah marked its busiest year ever in loaded container traffic in 2016, handling 2.94 million twenty-foot equivalent container units, up 2.5 percent over the prior year. Asian import traffic was also up some 0.26 percent, according to data from PIERS, a sister product of JOC.com within IHS Markit. It’s a small gain, but it’s a still a gain for the port which is already the Southeast’s market leader in Asian imports, with a 46.1 percent share of the market. That’s more than double the Asia import market shares of Savannah’s two closest competitors: Virginia with 23 percent and Charleston with 14.5 percent. In part to accommodate growth, in part to attract additional growth, the GPA has embarked on a multimillion dollar infrastructure investment plan. In 2016, the port authority added four new Panamax ship-to-shore cranes, 20 rubber-tired gantry cranes, a new 30-acre empty container yard, an eight-lane truck gate, and a six-acre extension of the port’s dockside container yard. The state also opened the Jimmy DeLoach Connector in 2016, providing direct truck access between Garden City Terminal and Interstate 95, cutting 11 minutes from the drive time between the port and the interstate.

An ongoing rail expansion project at Garden City Terminal will double the Port of Savannah’s annual rail lift capacity to 1 million containers. The expansion, expected to be completed in 2021, will be able to accommodate 10,000-foot long unit trains for both Norfolk Southern Railway and CSX Transportation, the East Coast’s two Class I railroads. “The expansion we’re seeing in our container volumes constitutes a strong vote of confidence from our new and longtime port customers. Keeping ahead of demand requires infrastructure development in both the public and private sector,” GPA Board Chairman Jimmy Allgood said in a statement. “The new facilities destined for our trade park are part of that equation.” The Savannah River International Trade Park is already home to IKEA and Target operations. According to Lynch, there is room for five to eight new facilities at the site, depending on individual customers’ needs. Lynch said the site is well-equipped to support future international distribution centers, transload operations, and cross-docking. “That 500 acres is land just ready to be developed,” Lynch said. “It’s its own trade park that’s got all its permits so it can be turned around for quick delivery.” Quick delivery is imperative for shippers looking to set up, or expand, shop in the booming Savannah market.

The biggest new development on the horizon is from the short line railroad OmniTRAX, which has announced plans to develop a 2,700-acre parcel 12 miles away from the Garden City Terminal, with rail access for CSX and NS. Among the largest near-port industrial sites east of the Mississippi, the first buildings will likely be ready for occupancy by late 2017, early 2018. Expansion could run for 10 to 15 years, the port authority has said. In the past year alone, shippers and developers have announced plans to develop millions more square feet: Floor & Decor, a 2.5-million-square-foot distribution center complex; OA Logistics/JLA Home, a 1.1-million-square-foot e-commerce fulfillment center; TPA Group, a 475,000-square-foot warehouse; Safavieh, a 500,000-square-foot distribution center. And a new Georgia-based company called PortFresh Logistics plans to introduce a temperature control warehouse in a matter of weeks, Lynch said. “It’s like a fire sale. It’s amazing and I’m not exaggerating,” Lynch said. “As soon as that comes online it is gone.”