Retail
Savannah Commercial Real Estate: 2010 Review & 2011 Outlook
Jan 19th
Time heals all wounds, but how much time is the big question. The bruises of the last few years are still there but, some signs of a turnaround are visible. Here is both a national & local look at 2010 and an outlook for 2011:
Office: National vacancy rates hit a 17 year high, but the 4th quarter was the first time in 3 years more space was leased than vacated. Locally, our office market continues to be soft and like the nation, vacancy rates will remain relatively flat. Limited office leasing produced some moves but few net-new users of any significance. GSA build-to-suits drove development, including Savannah’s first modern-day, Class-A building in the central business district. Slated to open in 2012, 70,000 SF will be constructed facing Ellis Square and house the U.S. Attorney’s office on four of its six floors.
RETAIL: US holiday sales were the best in 4 years. An increase in consumer buying power should lead to modest sales growth in 2011 with discount & grocery retailers benefiting the most. Oglethorpe Mall, nearly fully leased, reported 2010 store sales up slightly compared to a 3-4% decline in 2009. Broughton Street saw mixed results: some store sales were up over last year, but several closings still indicate there is work to be done to invigorate the corridor. Steady tourism improvements also helped increases in tax receipts and hotel occupancies.
Image courtesy of GPA.
Industrial: Vacancy rates peaked nationally around 14.1% & should finish 2011 around 13.1%. That’s far better than the near 20% vacancy rate in the Savannah area. Most large deals, including Coastal Logistics Group’s build-to-suit 320,000SF building and JLA Home’s 689,000SF warehouse purchase, were in some way related to the port. No other speculative big-box development is expected with 12-18 months or more of supply. Several smaller user-warehouses traded hands with an abundance of smaller 1500-5000sf lease spaces sitting vacant.
Multi-Family: Due to a slow economy and financing challenges in the single family housing market, the sector that showed real progress is 2010 was multi-family. US vacancy fell to a 2 year low of 6.6 % and rents rose .5%. The sector does lead in foreclosures due to most loans being underwritten at the height of the market. Locally, occupancy was steady if not grew with limited development activity in the Pooler area. Our multi-family developer clients are pursuing projects so, expect more development next year.
Investment: The target for most investment, top-tier markets have seen average asking prices increase. As of 3rd quarter 2010, Moody’s reported apartments led with a 16% increase from the year prior. Office increased 4.4% while Retail and Industrial fell 12% & 4.4% respectively. Look for continued oversees investment as the US is by far the number one choice of foreign real estate investors. Don’t expect that demand to translate into activity in our market except for very few institutional grade properties.
What to expect: Until we start seeing repeated months of 300,000 new jobs a month nationally & strong improvements in the consumer confidence index, the economy has long way to get back to “normal.” Savannah’s infrastructure and relatively low cost of living is ready and able to support all those retirees that want to move here but can’t sell their homes. The commercial market should make some modest strides in 2011 thanks to the port and manufacturing announcements, but it will be slow and steady recovery into 2012.
NAI Savannah Sponsors Economic Webinar:
Today at 1pm EDT, NAI Global’s Chief Economist and Wharton School of Business professor, Dr. Peter Linneman, will give his quarterly Global Economic Outlook related to commercial real estate. To register, send an email to: outlook@naisavannah.com.
Rex Benton is a Savannah Commercial Real Estate agent with NAI Savannah, the commercial division of Mopper-Stapen, Realtors and is a contributing columnist for “BiS-Business In Savannah” weekly business publication and is an active CRE blogger. www.naisavannah.com 912-358-5600 Office Space, Retail Space, Industrial Space, Investment Real Estate
Atlanta Retail Show Upbeat for 2011- How is Savannah’s Retail?
Dec 7th
The International Council of Shopping Centers, a 60,000 member global trade association for the shopping center industry, held its southeastern conference in Atlanta last week. 2500 developers, retailers, brokers & service providers networked to make deals with attendance up about 10 percent over last year.
Promoting several of NAI Savannah’s retail listings, our team found there was more activity on the tradeshow floor than last year. Opinions of those we spoke with mirrored the slightly improved consumer confidence index (CCI) in October. Though the CCI is still at very low levels, there was a very modest improvement in consumer’s belief that business conditions will get better over the next 6 months.
Economy brand retailers (Dollar General, Dollar Tree, Big Lots, etc.) are actively looking at expansions as their market segment has been one of the few that has fared well during the recession. Savannah based Citi Trends, a value family apparel retailer, has opened many stores around the US over the last few months. Retailers such as Wal-Greens & CVS had a lot of activity at their booth, but like most, will not expand unless new sites are “main-and-main” locations with strong demographics and little risk of failure.
Retailers that I get constantly asked about, Whole Foods & Trader Joe’s, are expanding only in primary markets for the same reasons. Expanding a non-franchisee retailer to a smaller market like Savannah involves more risk and requires additional management resources, even though it may do very well. Growing a brand in metro Atlanta for example, which allows for multiple locations within a close proximity, reduces distribution costs and manpower. This is especially important when margins are narrow. Unless there is a unique story, Savannah will be pursued by retailers when the larger markets are more saturated.
In a panel discussion, several investment REITS said they are finally starting some retail acquisitions but are being very selective. They did not see the large amounts of distressed properties as anticipated and need to start placing their funds. Cap rates have already reduced in some sectors.
Landlords say they are actively signing leases versus last year when they were just waiting for 2011. The economy is hopefully bottomed out with very few tenants asking for rent reductions compared to last year. A good local sign, the new Pooler Publix shopping center recently opened 93% pre-leased. They still have work to do to pre-lease Phase II of the project. In our overall market, new development has been almost absent. The Oglethorpe mall, nearly fully occupied, shows individual store sales up this year compared to a 3 percent drop last year.
Locally, Christmas retail sales are projected to increase 2 to 3 percent. Kiplinger projects 2010 national Christmas sales to increase by 3 percent. 2011 national retail sales are projected to be slightly under 3 percent versus the 3.5 percent projected for 2010. Making the fourth straight monthly gain, national retail sales were up 1.2 percent in October mostly due to auto sales.
Rex Benton is Savannah Commercial Real Estate agent with NAI Savannah, the commercial division of Mopper-Stapen, Realtors and is a contributing columnist for “BiS-Business In Savannah” weekly business publication and is an active blogger: http://www.savannahcommercialrealestate.blogspot.com/ www.naisavannah.com 912-358-5600 Office Space, Retail Space, Industrial Space, Investment Real Estate
Waterfront dining coming to River Street | NAI Savannah new Retail Listing
Nov 10th
- excerpted from an article By Adam Van Brimmer (savannahnow.com Savannah Morning News)
Traci O’Donaghue pauses mid-sentence as the hulking freighter slips by the River Street MarketPlace on its way to the Georgia Ports Authority terminal.
“Look at that,” O’Donaghue says after a moment. “I’m from Savannah and seen ships go up the river for decades. But I’m still in awe every time I see a ship go by. Imagine watching one go by from a table right here.”
The developers plan to develop the riverfront property just east of the open-air marketplace into a retail and restaurant complex. The site’s current occupant, Moran Towing, will move its offices and tugboats across the river to Hutchinson Island when its lease expires next spring.
O’Donaghue’s group, RPD, will begin redeveloping the site the day Moran moves out. Plans call for a 26,000-square-foot complex of two-story buildings that will link the River Street MarketPlace, which RPD developed and opened in 2003, with Morrell Park.
O’Donaghue and her leasing agents, NAI Savannah’s Rex Benton and Dicky Mopper, see the complex as the gateway to opening up the east end of River Street. The Moran complex sits across from the most easterly storefront building on River Street — the building houses the Olde Harbour Inn as well as small retail shops — and marks the unofficial commercial end of the street.The only business located east of the site is the Savannah Marriott Riverfront, although the old Georgia Power Building is for sale and is likely to be re-developed for retail or hospitality use. And the riverfront commercial district will eventually extend further east with the Savannah River Landing development.
Rex Benton is Savannah Commercial Real Estate agent with NAI Savannah, the commercial division of Mopper-Stapen, Realtors and is a contributing columnist for “BiS-Business In Savannah” weekly business publication. www.naisavannah.com 912.358-5600 Office Retail Industrial Investment Real Estate
Increased Black Friday Retail Shopping expected
Nov 13th
Hopefully avoiding the Wal-Mart trampling from last year’s Black Friday (the day after Thanksgiving), an International Council of Shopping Centers (ICSC) & Goldman Sachs survey reports that 16% of Americans will be shopping on the official start of the holiday shopping season. That is up from 10% last year but, still not where retailers would like it to be. The recent survey also said shoppers would spend $533 on presents & $133 on gift cards.
Oglethorpe Mall stores reported being down only around 3% year to year See my previous post . At an ICSC conference I attend, the Chairman projected a 1-2% increase in Holidays sales over last year.
Rex Benton is a Savannah Commercial Real Estate Agent for Mopper-Stapen, Realtors. He can be reached at the downtown office of Mopper-Stapen, Realtors at 912-238-0874 or our website. Office, Industrial, Retail & Investment properties for sale or lease.
Southeast Retail Convention & National CRE Update
Oct 17th
I & 750 or so fellow brokers/developers/retailers got together in Atlanta for the Southeast International Council of Shopping Centers (ICSC) conference this month. The number of convention exhibitors was half the size of last year & every developer I spoke with was basically sitting on their hands and waiting out the economy. The active ones are being creative & putting in non-traditional uses (e.g., churches) & fighting long term lease deals until the market improves.
Retailers are still actively looking for new sites but, only with prime locations & strong demographics. The Chairmen of ICSC delivered a lack luster report with expectations that we should see a 1% growth in Christmas sales & most of 2010 will be flat with signs of improvement in the 2nd & 3rd Quarter.
Marcus & Millichap Chairmen Harvey Green thinks we will avoid the $750 Billion CMBS credit “crisis” & hopes to see improvement Q2-3 in 2010.
Rex Benton is a Savannah Commercial Real Estate Agent for Mopper-Stapen, Realtors. He can be reached at the downtown office of Mopper-Stapen, Realtors at 912-238-0874 or our website. Office, Industrial, Retail & Investment properties for sale or lease.
Savannah Retail Space: A mixed bag
Sep 3rd
Walking briskly through Oglethorpe Mall last weekend (I try to avoid it like the H1N1), I had a hard time weaving my way through teens, tennis-dress-clad moms and dodging strollers.. You wouldn’t have thought that we were in “the worst of times.” The crowd could’ve been caused by the back to school rush but, since February, the mall has seen a steady increase in traffic. According to Phillip McConnell, Oglethorpe Mall General Manager, stores are reporting a 3-4% drop in sales from last year. Not sure how last year compared to more booming times, but 3-4% should be pretty favorable compared to other parts of the region & US. The Southside vacancy rate has been helped by the 32,000 SF hhgreg filling the former Linen & Things space but, still hovers around 16-18%. Large “Box” space is around $10/SF NNN (tenant pays taxes, insurance & upkeep expenses as well) with smaller spaces in the low-mid $20’s/SF NNN. Downtown / Historic District Long time downtown retailers, both national & local, have seen a significant drop in sales but, say they have had a recent uptick in activity. Quality restaurants downtown are still doing good overall. As far as new tenant demand, I always get requests for food & service (spas, designers) tenants but, have had very little inquires for hard goods retailers. There are several vacant storefronts but, I think, caused as much by half-bake business models as the economic slow down. Rates on average are around $18-20/SF NNN with a couple exceptions of $30/SF NNN around News Place and the AVIA hotel. We still have downtown retail development activity. The July opening of the 9 story Bohemian Hotel, rooftop bar (photo left) & restaurant has been a very busy draw Thurs-Sat night. Springhill Suites Hotel on Oglethorpe St. should open soon. According to the Convention & Visitors Bureau, Hotel Occupancy Rates are only down by 10%. Something that will “stir” interest in the overlooked east end of Broughton Street, The Melting Pot, opens September 23rd.
It seats 138, plus 1o bar seats &
includes meeting rooms & a hi-def AV/Internet system.
Westside Retail developers have slowed significantly from the boom of the last few years but, are following through with projects that have been funded. Publix on Pooler Parkway opens sometime Q4 ‘10-Q1 ‘11. Food Lion is active in the corridor with recent openings in Port Wentworth & Dean Forest road at the new Garden City Town Center(photo below). 
Walgreens is pursuing sites in the area but, smaller retail tenants (1000-1500sf) that fill strip center space are tougher to come by. Because of that building boom, vacancy rates are around 30-35%. Rates for big box are around $10 NNN smaller spaces range from $14-22/SF NNN.
Across all our markets, Retail Tenants seeking build out improvement money, free rent & other terms are certainly being pursued as landlords try to fill up spaces to stop the bleeding. The next 12-18 months could, unfortunately, still prove to be challenging. My Retail Listings: CLICK ME!
But…there is always a but when it comes to Savannah…we are in an excellent position for when the spicket turns back on, the economic engine of the Ga Ports Authority & military bases and our treasured coast line, combined with our relatively low cost of living, will help us attract (& hopefully capture) business as well as those Mid-West & North-East retirees that will finally be able to sell there homes. Some proof: CNNmoney.com just named Savannah #8 in their Top 25 Places to Retire.
photos courtesy: hhgregg, The Melting Pot, Rex Benton (I stopped off for a drink for research)
Rex Benton is a Savannah Commercial Real Estate Agent for Mopper-Stapen, Realtors. He can be reached at the downtown office of Mopper-Stapen, Realtors at 912-238-0874 or our website. Office, Industrial, Retail & Investment properties for sale or lease.
