The Spanish moss wrapped around the grand old oaks of Charleston, S.C., and Savannah, Ga., lends a sleepy, lost-in-time feel to these historic cities, some 140 years after the end of the Civil War. But don't be fooled, these genteel secondary-market charmers are coming of age as retail and mixed-use developments bloom.

While these markets were once too small to garner national attention, population and tourism growth has attracted retailers and developers looking for new frontiers.

“Charleston and Savannah are definitely where we want to be,” says Jay Levy with the Atlanta office of Equity One Inc., a real estate investment trust based in North Miami Beach, Fla.

Main streets are blossoming, making them popular for infill and closer-in redevelopment.

Take these examples:

On the outskirts of Savannah's historic district, Savannah Mall illustrates a successful repositioning of a property with just under 1 million square feet. Target, one of its new anchors, and the first in the area, is scouting a second location based on its initial success, market experts say.

Charleston's King Street, the main thoroughfare in the heart of the city's historic district, is undergoing its latest transformation. Upper King Street, dubbed the Soho of Charleston, is a magnet for furniture and design stores as well as tony boutiques and restaurants.

One of these old urbanism cities will also be proving ground for new urbanism: Charleston.

Noisette Project, a public-private partnership, intends to transform dilapidated North Charleston, along the Cooper River, into a 3,000-acre livable, walkable, sustainable development with bike paths and green space mixed with the older, existing buildings and homes. Part of the development will sit at the site of a former Navy base that closed 10 years ago.

Then there's the Magnolia Project, a 500-acre development that will include big-box retailers not currently allowed in the central business district, according to Colliers Keenan's year-end market report.

While Savannah boasts more of an eclectic feel rooted in the movie Midnight in the Garden of Good and Evil, Charleston — recently named the nation's “most mannerly city” by etiquette expert Marjabelle Young Stewart — evokes the classics in a Rhett Butler way. Only 108 miles separate the two, with wealthy Hilton Head Island, S.C., nestled between the two cities.

The two cities are very different.

Savannah boasts the Savannah College of Art & Design and Charleston has The Citadel military college.

Charleston's big yearly attraction is the famous Spoleto festival, an annual 17-day-long opera, music, theater and dance spectacle that takes the city over each May and June.

Among Savannah's annual celebrations: St. Patrick's Day, when the city turns the Savannah River green to toast this patron saint of drinking.

Charleston, with a metro population of close to 572,000, has grown by 70,000 people since 1990. Visitor spending is up nearly 138 percent since 1997. Tourists spent $5.7 billion last year. In the area, retailers are mostly in high-end developments along the coast and pricey stores in town.

Savannah is much smaller by comparison. Its population climbed to about 300,000 in 2003 from 258,000 a decade ago. Some 6 million tourists spent more than $1.5 billion in 2003, the last year for which data was available.

While Savannah is smaller, Savannah International Airport is a feeder airport for islands north and south of the city, including St. Simon's, Sea Island and Hilton Head to the north.

One of Savannah's biggest accomplishments — besides being spared by General Sherman's torch — is scoring the G-8 Summit last year, which cast the city in the international spotlight.

These factors have attracted developers — and national retailers — as Savannah transitions to a medium-size city.

“It's been an underserved market for years,” says Lyle Darnall, Edens & Avant's vice president of development for the Southeast region. “People are just kind of realizing it.”

Edens & Avant just completed the $15 million Abercorn Walk retail development with specialty retailers to include Chico's, Ann Taylor, Jos. A. Bank, White House/Black Market and a Fresh Market grocery store.

“There's a higher-end, more upscale consumer demanding more retail,” Darnall says. “Response is phenomenal. The shopping area pulls from a long way.”

When Abercorn Walk opened last summer, it lured several retailers from Oglethorpe Mall, Savannah's oldest mall with just under 1 million square feet.

However, the mall, owned by General Growth Properties Inc., is holding its own with Barnes & Noble, Hollister & Co. and Torrid. And across Abercorn Street, an empty Wal-Mart is getting new life with new tenants Cost Plus World Market, Ross Dress for Less and Linens ‘N Things, set to open later this year.

Longtime Southern rivalry

These two cities are in constant competition. Savannah and Charleston developed a bit of a rivalry over their ports in recent years.

Charleston's geography is often compared with Manhattan for one reason: it's surrounded by water. Crowned a royal colony nearly 300 years ago, Charleston sits on a peninsula between the confluence of the Cooper and Ashley rivers. Ships can reach open sea within 20 minutes, making it an attractive port — and the fourth largest in the United States.

Due to limited capacity in Charleston, Savannah's port is going gangbusters, catering to car manufacturers — including some lured away from Charleston — and retail imports from places like China and India. An expansion of the port is likely to help lure additional container traffic.

Where they find common ground is in their roots and old South mentality that you're a foreigner if you're not born and bred there.

Retailing knows no distinction. Mount Pleasant Towne Centre in Mount Pleasant is a relative newcomer, but it commands a lot of attention as it sits on the main artery to Isle of Palms and other high-end coastal communities. Anchored by Belk, a 16-screen theater and Bed Bath & Beyond, the shopping center owned by New York-based DRA Advisors, rakes in some of the highest area rents at $25 per square foot, says William Shanaman, vice president of investments and acquisitions with Charleston-based The Beach Co.

Only Charleston's historic district — made over in the mid-1990s — takes in higher rents at between $30 and $45 per square foot. At first, many of the local boutique owners worried that the onslaught of national retailers including Saks Fifth Avenue, Banana Republic and Williams-Sonoma would siphon off their business. But both old and new retailers have learned to coexist peacefully — and happily with all the foot traffic they generate for each other.

Downtown Savannah's historic district is also seeing new names — Gap and Banana Republic among them — as its main thoroughfare Broughton Street takes on new life.

Savannah is home to companies such as Gulfstream Aerospace, makers of corporate jets; Atlantic Wood Industries, maker of pressure-treated woods, and Byrd Cookie Co., a gourmet cookie maker.

Fortune 500 companies also operate manufacturing plants in the Savannah area, including plywood maker Georgia-Pacific.

What's also helping to fuel the economy is Hunter Army Airfield and Fort Stewart military bases. Combined, the bases employ more than 42,000.

Malls, too, are ripe for redevelopment. Savannah Mall is undergoing a retooling, after losing several anchors including Montgomery Ward. The 15-year-old mall, managed by Jones Lang LaSalle, last year added Target, Bass Pro Shops and Steve & Barry's University Sportswear. Next year, Burlington Coat Factory will open at the mall, as well as A.C. Moore Arts & Crafts.

“In order to keep our status, we saw a need to diversify our retail offerings,” says Nathan Kelly, general manager of Savannah Mall.

Kelly says the transformation came as a result of changing demographics, including a marked increase in Baby Boomers, coupled with consolidating and closing department stores.

“[We] proactively set out to transform the mall into the next generation of shopping centers,” Kelly says.

Charleston's local economy is diverse with manufacturing, biosciences and companies developing next generation communications technology, according to the Charleston Area Convention & Visitor's Bureau. In the past five years, employment in Charleston has increased 13.5 percent.

While frequent hurricane scares limit office and industrial expansion in Charleston, retail and residential development is growing, says Shanaman.

Pushing new limits

But attention is being focused outside their historic districts, as growth in both cities push new limits.

North Charleston, for example, is seeing its fair share of activity as a result of the Noisette Project.

When it's finished in 2020, it will house a multi-modal transportation center, upward of 5,000 residential units, more than 6 million square feet of retail, offices and other commercial space, plus a 10-acre park. About 300 acres are designated for a much-needed Port of Charleston expansion to stay competitive with Savannah and other ports. It has already attracted the H.L. Hunley, the recovered Civil War era submarine, which will be placed in a soon-to-be built maritime museum.

“It's called 2020 vision,” says John L. Knott Jr., chief executive officer of Noisette Co. “The plan takes a very different look at a city and different approach to planning.”

Knott master-planned the city-within-a-city, named Noisette after an 18th century French botanist banished from Charleston proper for his marriage to a Haitian woman.

The first phase of development is under way and it will take up to seven years to build out. It will have 360,000 square feet of retail and another 1.1 million square feet of commercial space. It will also include 2,000 housing units.

While you won't see a Wal-Mart in the project, you are likely to see local and regional retailing, Knott says, adding that he has put a call out to developers looking to take on retail development but willing to stay within the parameters of the master plan.

“We don't have anybody under contract,” Knott says. “The focus is on experience, around the arts and around sustainable service and destination retailing.”

The project is being built with a $2 billion public-private investment over time.

In Southwest Savannah, Metro Developers Inc. broke ground last July on a $12.5 million retail “village” called Lawrel Hill Village, along the Ga. 17 corridor. The project, which will be built in three phases, will include two larger anchor tenants, currently under negotiation, and several smaller retailers and restaurants.

Helped by Savannah's Port Wentworth, Pooler is garnering some attention because of its vast open lots along Pooler Parkway. Developers are scouting and building there and many big-box stores have found new homes, including Home Depot and Wal-Mart.

Darnall says his firm is focusing on developing a site in Pooler. While details are sketchy, since it's still several years away, the site can hold up to 700,000 square feet of retail.

In North Charleston, a project called Center Pointe, an entertainment and shopping complex with hotels, restaurants and offices, is planned on 300 acres.

Greensboro, N.C.-based Tanger Factory Outlet Centers plans to open a 400,000-square-foot outlet center at Center Pointe next year.

Lowcountry's Daniel Island, too, is getting residential and retail attention. The area is home to tennis events — Family Circle Cup and Davis Cup — and Kris Cooper, senior director of the capital markets group with Cushman & Wakefield in Atlanta, says his firm is putting together a high-end mixed-use deal on 53 acres.

He says the firm pitched it as a lifestyle center to Cousins Properties, but may also consider doing a joint venture deal with a partner.

“Developers like pristine sites and in Charleston, there's not a lot available,” Cooper says of the Daniel Island site.

The forecast for Charleston looks bright. This year, development plans will add up to 15 percent more retail space. Rental rates, stable up to now, are likely to rise by year-end, according to a Colliers Keenan report.

Those factors keep the retail developments and investors coming.

“It has become a real hot-spot for institutional owners and national builders and developers,” says Shanaman.

DEMOGRAPHIC OVERVIEW

  • Charleston population 2003: 571,631
  • Savannah population 2003: 294,000
  • Charleston tourism earnings 2004: $5.7 billion
  • Savannah tourism earnings 2003: $1.5 billion
  • Charleston avg. retail rent: $14.22 per sq. ft.
  • Savannah total retail sales (2004): $ 3 billion
  • Charleston total inventory: 15.4 million sq. ft.
  • Charleston avg. retail vacancy: 5.33%

Sources: U.S. Census Bureau, Colliers Keenan, Edens & Avant