Businesses, investors and real estate owners are still watching and waiting for the office and industrial markets to catch up with the real estate boom happening in Florida and across the country. Jacksonville is still slow to recover fully from the recession, there are some high points in the market and indicators all analysts will be watching this year. Will this be a banner year for growth and expansion in these markets? Many economic indicators suggest the answer is “yes.”
Northeast Florida’s construction boom
In Northeast Florida, the fourth quarter 2017 office vacancy ended at 7.6% with an annual net absorption of 644,000 square feet. Various general economic and market factors will continue to have a major influence on occupancy and vacancy rates in 2018.
The PGA Tour has announced a new, expanded 200,000-square-foot headquarters in Ponte Vedra (Jacksonville metro). Web.com is making a multimillion dollar investment in a newly constructed 200,000-square-foot office at Town Center Two, bringing its 3,500 employees closer to the city’s center while still enjoying a sprawling suburban campus. Town Center Two is an 18-acre site that will host a six-story, 218,700-square-foot office building with parking for 1,200 cars and an open floor plans including collaborative workspaces to foster greater teamwork, creativity and efficiency, according to the company.
McKesson Corporation recently announced its plans for a 125,000-square-foot Class A building in the popular and growing Gate Parkway area as part of the Southside Quarter development by Hines, also near the Town Center. These traditional office uses will continue to drive the market in Northeast Florida.
In the Jacksonville area, the Q4 2017 industrial vacancy totaled at 3.5%with an annual net absorption of 7.1 million square feet. This is an area that heavily relies upon imports and exports to drive manufacturing, storage and logistics in the market. JAXPort is already reporting increased traffic and activity in the first quarter of 2018 and we expect this will grow steadily this year. The first phase of dredging of the St. Johns has started in earnest after a long and arduous environmental fight. The dredging is important to JAXPort in its efforts to stay current with East Coast ports competing for post-Panamax ships and their cargo.
The big gorilla in the market continues to be Amazon with four current or planned locations. The giant e-commerce company is pouring money into the Jacksonville market. We expect to see continued expansion and improvement of our overall transportation and logistics infrastructure to support the reliance on Amazon for everyday products. We are already seeing a huge interest in the underdeveloped Northside and Westside as Amazon makes its mark in the region. Most of the deals now taking place involve around 200,000 square feet or with smaller offices of about 5,000 square feet.
Commercial real estate firms like Franklin Street are seeing increased need for space related to warehousing and back-office support functions, in both the office and industrial arenas. On the national level, several factors are impacting how occupants use office space. The market is experiencing higher demand for smaller square foot needs per employee, open-concept offices, and Class A/amenity-rich spaces. These “next generation” offices will be more prevalent in existing spaces being renovated or remodeled and we’ll continue to see this trend in new construction as well.
Population growth and job creation are two of the leading indicators to watch in Florida. The population growth is outpacing the national average and suburbs like Clay County/Orange Park and St. Johns County, with its #1 rated school district in the state, are benefitting from a surge of residents making these areas their home. Jacksonville’s unemployment rate currently stands at a healthy 3.1%, slightly better than the state of Florida (3.7%) and the national average (4.1%).
What to do now if you’re looking for tenants
Today’s tenants are looking for spaces that fit their workforce. Amenities such as conference rooms, flex spaces, access to the newest technologies, as well as breakrooms, continue to be important to commercial tenants who are expanding or relocating. Suburban locations and mid-rise buildings near commerce centers are still popular. Locations in areas with sidewalks and other access to parks or recreation are in demand as employers are focused more on employee wellness now than in the past.
What to do now if you’re looking for space
As always, choice locations are at a premium. The best advice for new office users and large companies looking to relocate – start early. We see companies taking over a year to find and build-out a suitable location. Leaving extra time for permitting, construction and build-outs is crucial to success in a crowded and growing market.
Real estate companies, brokers and developers all continue to pay close attention to the market as recovery takes place in the office and industrial segments. With low inventory and no new construction available for lease immediately, many companies will need to get creative with their approach for finding workspace.
ABOUT THE AUTHOR
Yvonne Baker has more than 25 years of office leasing experience in the commercial real estate market. As Regional Managing Partner, she currently leads both the Orlando and the Jacksonville offices and employees for Franklin Street. Ms. Baker has generated a lease volume of more than $350 million with over 4.5 million square feet of executed leases. She has received several recognitions including the University of Central Florida’s 2017 Notable Knight Award, multiple CoStar Power Broker Awards, Orlando Business Journal’s 2014 Women Who Mean Business and NAIOP’s President Award in 2015.