Commercial Real Estate, Capital, Insurance, Leasing & Management

How IKEA’s ‘no’ to Jacksonville became a ‘yes’

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IKEA has had its eyes on Jacksonville for at least 10 years. Hear from Franklin Street's Whitney Kantor and Katy Figg on the popular mega retailer.

198 Seminole St. IKEA has had its eyes on Jacksonville for at least 10 years.
The international retailer that sells affordable home furnishings, often assembly required, usually needs an area population of about 2 million people.

Jacksonville’s seven-county region won’t reach that until 2030, according to state projections.

But Northeast Florida’s post-recession growth caught IKEA’s attention. The search was reactivated two years ago.

“We saw the potential here in Jacksonville,” said spokesman Joseph Roth.

It’s not just the 60-mile distance that IKEA considers as the core customer access. It’s also the larger media market and trade area. In fact, Roth said more than 30 percent of IKEA’s sales come from customers visiting from beyond that hour’s drive.

Roth and Jacksonville leaders announced Wednesday morning the Sweden-based company would open a megastore at Gate Parkway and Interstate 295 in the fall of 2017.

City Council President Greg Anderson said the project is an investment of more than $80 million. IKEA, which is privately held, doesn’t disclose its spending plans but did not disagree.

The store will feature nearly 10,000 exclusively designed items, 50 room-settings, three model home interiors, a supervised children’s play area and a 350-seat restaurant serving the store’s Swedish specialties.

Moving from “reactivation” two years ago to confirmation Wednesday involved many steps and multiple visits.

There was the internal decision to move forward and start its due diligence. Roth said the company does not disclose when it makes such decisions.

The main move was to identify a site. IKEA looks for highly visible 25- to 35-acre locations along major highways and interstates that provide easy access for customers. It also looks for a site near a metropolitan area’s growing population center.

Stores generally are 350,000 to 450,000 square feet, but some, like in Jacksonville, are smaller to fit the property. IKEA buys its sites and builds its stores rather than leasing them from a shopping center owner or other landlord.

IKEA U.S. Real Estate Manager Liz Gabor said Wednesday the company identified sites with the help of CBRE real estate executives Collis McGeachy and Jess Simmons.

Roth said the company hired consultants to perform the due diligence to determine what would be required to support an IKEA development on a site, including regulatory requirements and government approvals.

IKEA chose land owned by HE Otter LLC and Charles Brightman Skinner Jr.

Roth said IKEA typically completes a property purchase after landing all governmental approvals and other conditions of the transaction. In this one, the city will need to approve a rezoning to accommodate more retail space on the site and other elements. He would not disclose a negotiated purchase price.

Roth said choosing the Gate Parkway site made sense because of IKEA’s size and visibility requirements. Its location abutting I-295 so close to the interchange was ideal for accessibility while minimizing the impact on neighboring communities, he said.

IKEA representatives made several visits. The real estate team, the U.S. managers and global representatives all made trips to town. The company is based in suburban Philadelphia.

Roth said once a site was identified, city leaders were brought further into the discussion. Taxpayer incentives weren’t involved.

Roth said IKEA met with Mayor Lenny Curry in August, a month after he took office, although Jacksonville’s location was not a done deal.

IKEA’s headquarters in Sweden approved the deal last week. Curry and JAX Chamber President Daniel Davis then learned of the approval.

Anderson and district City Council member Danny Becton were briefed Tuesday afternoon. “I feel like it’s Christmas,” Becton said Wednesday.

The rezoning request was filed Wednesday afternoon. Gabor said those approvals might be given by early 2016. Groundbreaking could take place by summer 2016, which means the store opening would be fall 2017 at the latest.

It’s a big deal for Jacksonville, said Curry, Anderson and Davis at the news conference at the chamber headquarters Downtown.

“In a word, it’s IKEA,” Curry said after the announcement. “This is another big part of the foundation of where Jacksonville is headed.”

Curry said IKEA validates the city as part of the tier that can attract and support top-level stores. Nordstrom and Tiffany & Co., both at St. Johns Town Center, are two more examples.

IKEA, Curry said in baseball parlance, isn’t a single. “This is maybe a triple or a home run,” he said.

Davis said IKEA is a symbol of how Jacksonville is an international city. He also said Curry was a mayor “that’s got his foot on the gas, and he ain’t taking it off.

“Jacksonville is wide open and more is to come and the next five years are absolutely going to be transformational for this community,” Davis said.

The Jacksonville store will be the fifth IKEA in Florida. IKEA was founded in 1943 and opened its first U.S. store 30 years ago in suburban Philadelphia.

There are 377 IKEA stores in 47 countries, including 41 in the U.S.

Roth said the 38 U.S. stores operating in the past fiscal year posted sales of $4.6 billion. That’s an average of at least $121 million at each location.

Property values ‘went up’ today

The move also resonates with retail property representatives.

Whitney Kantor, director of retail leasing for the Franklin Street commercial real estate firm in Jacksonville, said IKEA’s move into Jacksonville might attract other large national retailers who aren’t in the market.

IKEA’s move to Southside also could generate more retail growth there.

“This really puts Jacksonville ‘on the map’ in terms of competitive, innovative and growing cities in the U.S.,” Kantor said.

The IKEA site is south of the St. Johns Town Center, Jacksonville’s premier shopping destination with many top retailers who open just one store in a market.

Kantor said the Town Center’s success has shown that while Jacksonville doesn’t have the population density as larger cities, “we do have the dollars and other economic drivers to sustain this type of retail.”

IKEA also will create demand by other retailers who want to lease in nearby shopping centers, leading to more construction.

“Existing shopping center owners are probably now strongly considering revitalizing, reworking or retooling their centers,” Kantor said.

That could mean higher rents and lower vacancy rates around the area south of Town Center.

And, she said, “Property values at both developed and undeveloped property around the site just went up in value today.”

Franklin Street retail leasing associate Katy Figg said the IKEA site is an easy route south from South Georgia and north from St. Johns County. IKEA also understands I-10 is a direct route to Tallahassee and other points west.

Figg said as of Wednesday morning, Franklin Street will be advising clients about their 2017 expansion plans. “Twenty-four months is not a long time in the retail development world. Retailers who want to be near IKEA should plan now,” Figg said.

Geneva Henderson, executive vice president of Lat Purser & Associates Inc., said Jacksonville property representatives have long solicited IKEA for the area market, with different opinions about the best location.

Henderson said the announcement Wednesday surprised a lot of people, and the retail brokers and agents will add IKEA to their site maps to sell the city to new and different tenants.

“Tenants like IKEA speak very strongly about the growth and income our city is producing by choosing us,” she said.

One of the site plans displayed at the media briefing Wednesday showed the site location on a roadway entrance would be built from Gate Parkway onto the site. Roth said the company hopes that’s the address.

It’s IKEA Way.

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