Excerpted of Jacksonville Business Journal story.
When Jaymee Yocum opened Bark Boutique on Park Street about nine years ago, she said she remembered paying about $800 a month in rent.
Almost a decade on from the Great Recession, the combination of a booming Five Points submarket and positive economic growth across the country has Yocum now paying multiple times that amount — ”and I actually have a good deal,” Yocum joked.
While the median rate for small retail spaces in the Riverside, Brooklyn, Avondale and Murray Hill neighborhoods are around $13.41 per square foot, according to CBRE’s annual State of Florida retail report, Yocum has heard of rents as high as $40 per square foot at the most-highly sought-after intersections in the area.
“I have a 10-year lease, and I recently signed another,” she said. “Thank God I got in when I did.”
Other retailers — particularly locally owned small businesses on the First Coast — are feeling the crunch, with the average asking prices for retail space in the greater Jacksonville area having risen 12 percent year-over-year, one of the highest increases in the country.
The only markets where rates are growing faster are Miami and Oakland, California — at 14 percent and 13 percent respectively — while metros like Cleveland, Indianapolis and Louisville saw declines.
Why the rent is so dang high
The main cause of the rocketing rental rates in Jacksonville (and throughout the Southeast) is the population growth that the region has seen in recent years, said CBRE Florida Research Manager Scott Brien.
The Jacksonville market has experienced a 2 percent annual population growth rate that shows no signs of slowing down, CBRE noted in its 2018 Southeast real estate market outlook.
“The consumers are here,” Brien said, which is driving the demand for retail space.
And even as that demand grows, the supply is not.
While the marketwide vacancy rate hovered around 4 percent and more than 1.7 million square feet of retail space were absorbed in 2017, only around 500,000 square feet were under development. Even with demand rising, only about 800,000 square feet are under development.
The cost of that construction is also going up, said Carrie Smith, managing director at Franklin Street, with more expensive land and rising building material prices being passed on to tenants.
That rise in construction cost can also be attributed to an increase in the average rate of labor cost, which is being driven by a construction labor shortage. David Kottmyer, vice president of operations for Danis, told the Business Journal that the company has been advising its clients to include escalation costs in project budgets.