Jacksonville’s job and population growth and low unemployment rate are keeping commercial and multifamily real estate developers and brokers busy.
The area’s major commercial brokerage firms reported fourth-quarter conditions that indicate 2019 likely will be more of the same.
CBRE reported that job, population growth and business expansion “will continue to increase demand” for office and warehouse space.
Factors include the growth in e-commerce centers, such as Amazon.com’s two fulfillment centers and one being built for Wayfair Inc.; manufacturing like JinkoSolar Holding Co. Ltd.’s solar-panel plant; technology startups; health care-related businesses; and the apartments and retail space being built to serve the growing population.
In its opening comments, NAI Hallmark reported that while there is some slower movement, the Jacksonville market continued trending upward.
“We expect to see some fluidity in the early months of 2019; however consumers and business owners in Northeast Florida are optimistic for the year,” it stated.
What the experts are saying
Office market: “2018 was a transformational year for Jacksonville. The office sector has grown in a careful and calculated fashion and the limited new speculative construction introduced has been met with enthusiasm.” — Avison Young
Multifamily market: “The 2019 pipeline is poised for a record-setting year. Factors such as strong population growth, employment growth, and rising median income levels continue to drive demand.” —Colliers International
Industrial market: “Healthy market activity created positive momentum during the year, dropping the overall vacancy rate to a historic low of 2.3%.” — Cushman & Wakefield
Here's more from the reports by CBRE, Colliers International, Cushman & Wakefield, NAI Hallmark and Avison Young:
Industrial: Tight market drives record construction
Companies looking for a large amount of warehouse, flex and industrial space in the Jacksonville area are driving what the CBRE real estate company says is the “most square footage under construction on record.”
Its fourth-quarter report said just two existing buildings could accommodate users needing at least 200,000 square feet, leading developers to start construction on 13 buildings totaling 4.9 million square feet of space, focused in North and West Jacksonville.
Speculative buildings often are leased before completion. “All signs indicate that much of this construction will actually deliver close to fully leased, if not fully leased,” reports Colliers International.
Vacancy rates remain low – in cases, historically so. Colliers reports that the vacancy rate for Class A modern warehouse space probably is close to 1 percent.
Rental rates are rising and vacancy rates are steady or dropping. “Absent a recession, we believe market rents will continue to escalate sharply if new construction does not provide relief through additional vacancy,” Colliers wrote in its fourth-quarter market report.
There’s more to come.
“Developers remained confident that tenant demand would easily absorb new space coming online and continued to acquire land to position themselves for future growth,” said Cushman & Wakefield.
At year-end, it said, more than 8 million square feet of industrial space was proposed for development over the next three years.
Retail: Rental rates down, with more space on the way
NAI Hallmark reported that Jacksonville’s retail vacancy rate ended the year pretty much as it started, while asking rental rates were down from the third quarter.
A lot of new construction is on the way – almost 2 million square feet, more than the size of a large shopping mall.
At the same time, closed stores became available for tenants, or remained available, like the former Sears store at Regency Square Mall.
The former Best Buy in The Markets at Town Center began a conversion into a Sprouts Farmers Market, while the Thomasville furniture store closed and is available for lease.
“As many of the underperforming big boxes have gone dark, we are seeing more and more development opportunities with strong performing retailers,” said NAI Hallmark retail specialists Austin Kay and Eric Yi in the market report.
Some centers, such as Regency Court Shopping Center, found new uses with entertainment facilities that include a roller rink and indoor adventure park. The former RH Outlet in Southside also is slated to become an adventure park.
The Pavilion at Durbin Park in St. Johns County is one of the largest retail centers to come online.
Office: Large spaces more difficult to find
Jacksonville’s office market remains favorable for landlords, reports Avison Young, and it could stay that way well into the year.
“With limited blocks of large quality space available, companies in growth mode are finding fewer options,” it reported.
Some companies will lease build-to-suits, such as Web.com and McKesson Corp. Others are renovating space in buildings formerly used for other functions, like Miller Electric Co. And some, such as VyStar Credit Union, are buying buildings for their use. VyStar bought a 23-story Downtown tower.
“The build-to-suit projects are common in Jacksonville due to a lack of availability for large contiguous blocks of space,” reports CBRE.
Rental rates are increasing, while the vacancy rate increases or decreases depending on market factors.
Downtown Northbank vacancy generally remains higher than the suburban rate, although the Downtown Southbank vacancy is lower than in the suburbs.
Average lease rates are higher both on the Northbank and the Southbank than in the suburbs, reflecting the Class A space in the towers.
Colliers International said the Butler Boulevard corridor continues to be the most active submarket for Class A space and the Downtown office market continues to benefit from the VyStar purchase.
It said the only large blocks of space in the Northbank market are in the Bank of America Tower and One Enterprise Center.
“We hope that these recent activities mark the beginning of the end of a lengthy period of high vacancy and low rent levels in the urban core,” Colliers wrote.
CBRE expects business development and job growth to continue supporting the overall market. As a result, vacancy rates will continue to fall “as Jacksonville continues to be an attractive office market option.”
Multifamily: Strong demand fuels apartment boom
If it seems that there’s an abundance of apartment construction and renovations of older units all over town, it’s because there is.
“Jacksonville continues to be one of the highest performing and most sought-after multifamily markets in the U.S.,” reports Colliers International.
Despite a record number of apartments being built, strong demand has kept vacancy rates below 4 percent, it reports.
In return, that encourages new development and continued rent growth.
Colliers reports there are almost 78,000 apartment units in the area, about 5,300 units are under construction, another almost 2,700 are proposed and another 1,700 are under renovation.
Average rental rates per square foot range from a low of 93 cents in West Jacksonville to $1.38 in and around Downtown