In several office markets across the United States, there is an excess of old office spaces that are difficult to fill. However, Savannah, Georgia stands out with one of the nation’s lowest office vacancy rates. Despite this, there’s a growing trend in Savannah where developers are purchasing historic office buildings in prime locations to transform them into hotels, capitalizing on the city’s thriving hotel industry.
The hotel sector in Savannah’s Historic District is booming, with occupancy rates bouncing back to pre-pandemic levels. The average daily rates (ADR) have surged by nearly 30% compared to pre-pandemic figures, as per CoStar’s data. Hotels in the Historic District consistently outperform the broader Savannah market in terms of occupancy and ADR.
Savannah’s office market, being smaller, sees infrequent office sales. However, in 2023, it broke records with office sales totaling $110.5 million, far exceeding the five-year average of $72.7 million. This spike is largely driven by planned hotel conversions in the downtown area. The downtown office buildings, predominantly older structures with smaller floor plans in pedestrian-friendly zones, are ideal for redevelopment. About 70% of these buildings were built before 1960, and less than 4% are high-end properties.
Downtown Savannah’s office market is notably tight, with a vacancy rate of just 2.6%, much lower than the national average of 13.6%. While most regions have seen an increase in office vacancies since 2019, downtown Savannah’s vacancy rate has actually decreased, mainly due to office spaces being demolished or converted to other uses.
One notable conversion is the Johnson Square Business Center, set to become Savannah’s first Ritz-Carlton hotel. The property, acquired by TMGOC Ventures, was originally the Savannah Bank and Trust Co. building, constructed in 1911. This 15-story building is planned to open as the Ritz Carlton – Downtown Savannah in late 2026.
Another historic building on Johnson Square, the Manger Building, was bought by Left Lane Development for $18 million. This building, initially a hotel over a century ago and later used as offices, is set to reopen as the Manger Hotel in 2025.
Close by, Marriott World Vacations purchased a 1954 office building, with plans likely for a hotel development. This property is near the former Georgia Bureau of Investigation building, which is being transformed into a Tempo by Hilton.
These developments coincide with expectations of increased demand following the $276 million expansion of the Savannah Convention Center, set to double its capacity by summer 2024. Although plans for a new headquarters hotel fell through due to tough market conditions, the Savannah-Georgia Convention Center Authority is taking steps to finance its construction, with a completion timeline still years ahead. Local tourism officials anticipate a hotel room shortage near the expanded convention center and believe the addition of more hotels could meet the expected rise in demand while keeping convention attendees in close proximity.
