A tidal surge of distribution space is pouring into Savannah, Ga., but local experts say the pending 38% increase in inventory is more likely to buoy, rather than saturate, the port market.

“It is a rapidly expanding market that has attracted a lot of developer interest, but clearly the recent spate of deals is extraordinary,” says Sean Fitzsimmons, vice president of national business development at Industrial Developments International (IDI), an Atlanta-based industrial developer.

By early summer, some 6.5 million sq. ft. of industrial space will open for immediate occupancy by signed tenants, according to IDI. In addition, 2 million sq. ft. of speculative distribution center buildings will hit the market by the end of the year. And projects currently under construction could add 3 million sq. ft. of spec space early next year.

In short, Savannah's inventory of warehouse and distribution space measures about 30 million sq. ft., so projects in the pipeline equal nearly half the current inventory. Such a large influx could send panic through most markets, but is more likely to be welcomed by both tenants and space providers around the Port of Savannah, where vacancy is 3%.

“With the [leasing] activity I'm seeing, I think we are going to be fine. I think it is going to help us,” says Cliff Dales, partner at Savannah-based Neely/Dales LLC, which provides leasing services for commercial and industrial space.

Until last year, Savannah developers generally built projects to suit specific companies, rather than risk speculation. The lack of available space probably prevented some companies from considering Savannah in their site searches, Dales says.

He was skeptical that Savannah could absorb the warehouse space under construction, but recent deals convinced Dales otherwise. Target Corp. will soon occupy 1.5 million sq. ft. in nearby Liberty County and 2 million sq. ft. in Savannah, where Ikea is building an 800,000 sq. ft. distribution center.

Retailers are also clamoring for digs in Savannah as part of a national trend toward port-related industrial growth. An increasing reliance on imported consumer goods is straining existing supply and has fueled the construction of new distribution centers at many U.S. ports.

Traffic in boxcar-shaped shipping containers should hit a record high in July, then immediately break that record in August, according to Port Tracker, a monthly report by the National Retail Federation and Global Insight Inc. July volume is forecast at 1.54 million TEUs. (One TEU is equal to a 20-foot section of a shipping container.) August is projected to reach 1.57 million TEUs.

With a recent trend toward distribution centers measuring 500,000 sq. ft. or more, companies may absorb most or all of Savannah's speculative space, says IDI's Fitzsimmons. That's why the company is proceeding with plans to kick off a 240,000 sq. ft. building and will soon begin speculative construction at a Liberty County project that could one day measure 10 million sq. ft.

“Vacancy today is practically non-existent,” observes Fitzsimmons. “But as these speculative projects come on line at the end of this year and early next year, that's where the [overbuilding] risk will be.”