Chinese Logistics Companies Are 'Everywhere' In Savannah's Industrial Market

Large retailers have pulled back on industrial leasing over the past year, but in the warehouses surrounding the Port of Savannah, a new customer has quickly filled the vacuum: Chinese third-party logistics companies. 

Chinese 3PLs inked 63% of total year-to-date leasing activity in Savannah’s 138M SF industrial market, Prologis Vice President Cassie Hanavich said at Bisnow’s Savannah State of the Market event Wednesday morning at the Hyatt Regency Savannah.

“2024 has definitely been the year of the Chinese 3PL,” Colliers principal Hilary Shipley said. “They have been everywhere.”

Shipley said many of these Chinese companies were picking up the activity slack after groups like Amazon, Home Depot and Lowe's began to sit on the sidelines of leasing activity following a surge in deals during the pandemic. 

Tenants in Savannah had absorbed 8.1M SF of industrial space through the third quarter, according to Colliers, down from 9.9M SF at the same point last year.

With the deluge of new supply and a decline in big-box industrial leasing, panelists say landlords of shiny new warehouses are more willing to take chances on tenants that have lesser credit, a category into which Chinese 3PLs largely fall.

“Part of it is they come into softer markets because they have a hard time competing against brand names, and times are tight,” Shipley said. “It’s easier for them to come in. The tenant pool is smaller. These landlords are eager to get the building filled.”

Hanavich said Prologis has seen a surge in Asian logistics demand, especially for those looking to open East Coast hubs.

“The last two deals I inked in Savannah were Asian group deals,” Hanavich said. “We're seeing it a little bit consistently across all our port markets. I think it will continue and maybe not be the dominant player, but with econ still growing and the shifts from these groups who have their presence on the West Coast diversifying to the East Coast, I think it will continue to be a trend.”

Developers have unleashed a deluge of new, mostly speculative warehouse development in the Savannah region. Developers were underway with more than 11M SF of warehouses in the third quarter, down year-over-year from more than 17M SF.

The shortage of big-box tenants as the construction wave hits has pushed vacancies up from 4.2% in Q3 2023 to 9.2% at the end of September, according to Colliers.

Smaller tenant activity has remained robust. Average tenant size has shrunk from 400K SF last year to 250K SF, NFI Vice President Troy Adams said.

Scott Rogers, vice president of Broe Real Estate Group, said the size disparity has led to a gulf in the vacancy rate between the big-box and bread-and-butter distribution facilities. Buildings 500K SF or smaller have a 6% vacancy rate, while those larger are 12% empty, he said.

Shipley said Chinese companies may have another motivation to build up their logistics networks in the U.S.: The threat of tariffs coming from both sides of the aisle. 

Former President Donald Trump said he would push a 60% tariff on all Chinese imports and up to 20% on all other imports to the U.S. At the same time, President Joe Biden offered new rules that would slap tariffs on foreign companies shipping goods they claim were worth $800 or less, The Associated Press reported. Such a move would impact online Chinese retail giants Temu and Shein, who helped push the number of small shipments from China from 140 million annually to 1 billion last year, according to the AP.

The threats have companies pushing more inventory to the U.S. ahead of any tariffs or restrictions, Shipley said. 

“There's been some uncertainty there for the Chinese importers, and so they've been sending stuff ahead of those changes,” Shipley said. 

When asked if a new Trump administration’s plans for tariffs on imports would impact Savanah’s economy, Mayor Van Johnson replied, “Absolutely.”

“It’s a concern for us,” Johnson said. “Economists have said that it is bad economic policy. I don’t have a degree in economics, but I tend to believe those who study that kind of stuff, about keeping this economy moving, keeping ships coming in and out of our ports, keeping people on our docks working, and keeping our products going from our ports around the country.”