November 7, 2005
Partners in trade

Feel the sea breeze. Although metro Atlanta is more than 200 miles from
the ocean, real estate experts say it's evolving into an "inland port"
for warehousing and distributing products going to and from the booming
Port of Savannah.

"The port is having a very large and growing effect on the commercial
real estate market in Atlanta," said Beth McClurg, director of
industrial brokerage services for CB Richard Ellis Inc.

Said Tim Evans, a director of business recruitment and retention for the
Georgia Department of Economic Development (GDEcD), "The Port of
Savannah is a factor in almost every location decision for distribution
centers servicing the Southeast -- or a super-regional market. With the
port so close by, Atlanta has an advantage over other cities in the
region that are competing for those centers."

Various factors are fueling the phenomenon, including Atlanta's rail and
interstate highway systems, the sheer size of the metro area's consumer
market and tight industrial space in Savannah.

That may be changing as developers build bulk import warehouses near the
port -- with a massive boost in port activity ensuring that demand for
space in both markets will remain high (see story, 13C).

In September, Gov. Sonny Perdue announced that Target Corp. plans to
build a 2 million-square-foot import warehouse at the Savannah River
International Trade Park, four miles from the Garden City Terminal at
the port.

Activity in Savannah -- the nation's fifth-largest container port -- is
on an upward arc, spurred by soaring business with Asia, notably China,
a trend likely to accelerate. The port is the first major container
terminal for ships going through the Panama Canal to the Eastern

Between 1999 and 2003, the port's trade with China grew by more than 400
percent, and China now accounts for roughly 70 percent of all imports
into Savannah.

To accommodate the growing traffic, the port has embarked on a $109
million expansion program that will increase capacity by 20 percent at
completion in 2007. If history is any indication, that will generate
additional distribution-space growth in metro Atlanta.

All of this growth is driving business in Atlanta, with new warehouses
being added to the 500 million square feet that exist in the 17-county
metro area, according to Mal Hill, a partner with Solution Property

"It really gets down to infrastructure and the ability to move goods
efficiently and consistently," said Hill, who, with partner Eben Hardie
III, is developing a 4.5 million-square-foot import warehouse near the
entrance to the Port of Savannah. "And when you have a more dynamic
industrial market, your costs are lower."

In other words, Atlanta draws distribution business to itself because it
already has a reputation for moving goods cheaply and efficiently.

Georgia Ports Authority (GPA) statistics show the strong ties between
the Port of Savannah and metro Atlanta. In fiscal year 2004 -- the
latest data available -- seven of the top 20 exporting counties in
Georgia via the port were in the Atlanta area, as were 10 of the top 20
importing counties. Even if goods do not stay in Atlanta, chances are
they stop off here at a regional distribution center.

Savannah is not as big as California's Port of Long Beach -- a
powerhouse for container shipping. Not yet.

All told, Savannah handled a record 1.76 million TEUs (20-foot
equivalent container units) in fiscal year 2005, a 12 percent increase
over fiscal 2004, according to the GPA. The latest figures represent the
17th year of consecutive growth, according to the Georgia Ports
Authority. By contrast, the Port of Long Beach handled 5.7 million TEUs
in 2004 (4.3 million year-to-date in 2005), having seen negative growth
between 2000 and 2001. And the Georgia port is catching up.

"Unlike many of its competitors, the Port of Savannah has a lot of room
to grow," said Robert Morris, director of external affairs for the GPA.

"Atlanta and Savannah is the natural Southeast distribution hub," said
Ed Frazelle, who founded the Logistics Institute in 1991 at Georgia Tech
and now is president and CEO of consulting firm Logistics Resources

The No. 2 port in the nation, behind Long Beach, is the Port of New
Jersey, said John Porter, senior vice president of global logistics with
CB Richard Ellis.

"They have land constraints," he said. "It's a highly developed area --
lots of office buildings there, residential, high-rise condos going up.
And they have very limited space for growth. Fifty years from now, the
Savannah port may look like the New Jersey port."

The Port of Savannah also has benefited from recent labor issues in Long
Beach, Frazelle said.

Before, Asian exporters would move goods destined for the East Coast to
California first, then transport them by rail and truck. But things are
now moving toward a trend called "all-water," Hill said.

Ronald Tolley, CEO of the Liberty County Development Authority, agrees.

"A good number of companies started looking for alternatives, and one
was Savannah," said Tolley, whose county is welcoming a 1.5
million-square-foot regional distribution warehouse for Target, 30 miles
from the port.

Morris said the port used to be primarily an exporter, but in recent
years has greatly expanded its import side, which "has helped
Georgia-based companies extend their reach around the globe."

Savannah's closest competitor, the Port of Charleston, also is growing.
The port handled 1.97 million TEUs in fiscal year 2005, up 14 percent
from fiscal year 2004, according to the South Carolina State Ports

The two ports definitely are rivals. But according to Hill, many of
Charleston's imports come from Europe, while Savannah has made it a
point to court Asian trade.

Porter agrees.

"The Savannah port has done a remarkable job of marketing itself to the
Chinese," he said.

Rising traffic along the Chicago -to-Jacksonville rail corridor will
eventually necessitate expansion of the 250-acre Norfolk Southern Corp.
facility in Austell, said Joel Harrell, resident vice president for the

Harrell said port-generated container traffic would be one factor
prompting any expansion. Port traffic handled by the railroad in Atlanta
increased 14.6 percent in 2004 over 2003, and 9.8 percent in the first
seven months of 2005 over the same period in 2004.

"Intermodal traffic as a whole is increasing," he said.
"Chicago-to-Jacksonville is a very hot corridor for us now, and Atlanta
is a fairly congested area, where various lines come together.
Eventually our facilities will have to be expanded, but this would be a
long-range project."

McClurg said national developers are planning warehouses in Savannah

"Savannah is hot right now from an industrial real estate perspective,"
McClurg said. But she added that metro Atlanta has advantages over its
coastal cousin in attracting distribution-center growth.

"Given the size of the population, Atlanta is the ultimate destination
for a lot of products from the port, especially consumer goods," McClurg
said. "A lot of those products are [already] headed to the largest city
in the Southeast."

The sea breeze, indeed, grows stronger.