CITY HIGHLIGHT, APRIL 2006

JACKSON CITY HIGHLIGHTS
Mark McCormack, Taylor Rhea, Mike Peters, Bill Cook

State of the Market

There is no under estimating Hurricane Katrina’s devastating effect on the Mississippi’s central and coastal regions. Hundreds of people lost their lives. Thousands of people lost everything they owned. One-third of coastal houses were destroyed. Eighty miles of Mississippi coastline was virtually wiped out, and close to 70 percent of the state’s homes lost power. While it will take years to complete the cleanup and economic recovery, the state is not alone. The nation has come to Mississippi’s aid, pouring in record numbers of food, clothing and financial donations. And now the federal government has recently enacted major legislative assistance.

The primary recovery vehicle has been the creation of the Gulf Opportunity (GO) Zone Act of 2005. This bill, passed by Congress, could pump billions of private investment dollars into Mississippi. The attitude around the state is slowly shifting from one of grief and shock to a focus on rebuilding. Mississippi-based companies are using this opportunity to strengthen their focus. As a result of the opportunities created by the disaster-relief bill, companies from outside the region are now looking at ventures in Mississippi.

A major attraction of the act is the 50 percent bonus depreciation in the first year of operation for real estate expenditures and equipment. In addition, $4.8 billion in private activity bonds — both taxable and tax-exempt industrial development revenue bonds — will be available. A small enterprise development bond program for manufacturers, processors, warehouses and distribution centers also exists.

This GO Zone legislation has turned the heads of companies globally. This is a giant leap forward in the rebuilding process, resulting in a real estate boom for the Jackson metropolitan area.

— Mark McCormack

Office Market

Fifty percent of the region’s office space is in downtown Jackson’s central business district (CBD), so the most immediate impact was felt here. Several new corporate headquarters, and new branch offices have quickly moved into the area and acquired most of the available office space. With occupancy rates already well above 93 percent, the CBD looks to increase that number rapidly.

Parkway Properties completed the renovation of the newly named City Centre Building and opened a new parking garage attached to the building on West Street. Duckworth Realty teamed with Entergy Mississippi to renovate and re-open a historic office building as Electric 308, which will house the Entergy’s regional headquarters, on the corner of Pearl and West streets. Taking a cue from the Fondren Corners highly successful mixed-use project, the 10-story Electric 308 is the second in the metro area to combine office, retail, and luxury residential apartments in one building. It has been met with rave reviews, accompanied by a waiting list for apartment residents. Also, Peters Real Estate renovated the 12-story Plaza building, a third such project, which houses 16 luxury apartment residents on its top two floors with retail and office space below. Also, 200 Congress Street, a former bank building located across from Smith Park and near the state capitol, has been renovated into new offices by State Street Group.

Several large office buildings, such as the 100,000-square-foot former WorldCom building, are fully occupied for the first time in recent years. A new convention center has been approved and is in the planning stages. The new teleconference center, a training center for local users as well as an attraction for out of town firms, has recently been completed. A plan to transform eight blocks of downtown Jackson into a retail and entertainment district with new residences and office space is waiting for legislature approval later this year. The details of this project, named Old Capitol Green, are still being worked out. Also, new office buildings are being proposed across the street and adjacent to the proposed district by local and national developers.

Growth in the Northeast Jackson/Interstate 55 submarket continues its upward trend as vacancy rates in this high-visibility corridor remain in the low single digits. Kerioth Corporation recently completed a new office building, housing an expansion of the Baker Donelson Bearman Caldwell & Berkowitz firm.

The rapidly expanding Highland Colony Parkway submarket, which begins at Interstate 220 and runs north to Highway 463 in Madison, evolved as several new buildings opened in the past year, with more planned and under construction. The Colony Park development includes two completed buildings by H.C. Bailey Company: a new Class A development which will house Merrill Lynch and Cellular South’s new headquarters. Baptist Medical Center has started construction on a new medical office building on the north end of the parkway at Highway 463.

The fourth major growth region in the Jackson metropolitan area is the Lakeland Drive corridor, which splits the city running East and West. Occupancy rates in this market remain an outstanding 97 percent, due mainly to superior activity in the surrounding medical industry and the high volume of retail activity.

— Mark McCormack is a managing broker and senior vice president with Jackson, Mississippi-based Mattiace Properties, Inc.

Retail Market

Once again, downtown Jackson will most likely see the benefits from the GO Zone legislation first, if only because the retail market has traditionally been small and the growth rate can be dramatic in this urban setting. With developers eager to take advantage of the one-time bonus depreciation, and with more and more residents moving into the area, the market for retail space is ripe for expansion. The aforementioned Old Capitol Green, a renovation of eight city blocks into an entertainment and shopping district in a highly visible and easily accessible part of town, will give the downtown retail market a boost. This new development would not be the first such district in the downtown area, however, as the Farish Street Historical District, which opened in 2004, is home to numerous restaurants, shopping, and history and art galleries.

In the Northeast Jackson/Interstate 55 submarket, retail sales are very strong, and growth continues in this area. Because there is very little land available for new shopping centers, existing shop spaces consistently have low vacancy rates. Cress Realty has recently finished a face-lift of Maywood Mart, which continues to be fully occupied. Highland Village, the high-end retail shopping hub of Northeast Jackson for more than 20 years, continues to evolve and revitalize its tenant mix successfully again and again. The outdoor mall boasts some of the premiere retailers in the metropolitan area. Local merchants in this submarket continue to record very high sales numbers.

East of town, the Flowood and Brandon markets are experiencing solid growth, due in no small part to the areas on Highway 25 known as Dogwood Festival and Dogwood Promenade. These shopping centers have added more than 500,000 square feet of retail growth during the past 2 years to the already solid submarket, and more expansions are in the works as retailers try to capitalize on the upswing of single-family housing in the area.

It’s hard to miss the sudden increase of construction sites as you travel north on Interstate 55 from Jackson through Ridgeland and Madison. Both towns are experiencing tremendous growth in moderate- to high-income family residences, and local and national retailers have taken note.

In Ridgeland, two mixed-use office/retail centers are being constructed near the town center on Jackson Street, and two new strip centers have been opened in the last 12 months along the Highway 51 corridor. Kerioth Corporation’s The Township at Colony Park is a spacious 95-acre mixed-use development located along Highland Colony Parkway and Steed Road. The Township will provide residences, public spaces, two seven-acre lakes, 150,000 square feet of shopping, and office space within walking distance of a vibrant town center. The Township is currently under construction, and should be completely developed in 3 to 5 years.

The Mattiace Company’s Renaissance at Colony Park is a 75-acre development promising to be an extraordinary shopping and dining experience. Located at the intersection of Old Agency Road and Highland Colony Parkway, Renaissance will include 550,000 square feet of retail space, 230,000 square feet of office space, numerous restaurants, a department store, and a new concept hotel. The design is derived from the streets of a Mediterranean village with water features and a town square hosting an on-going array of entertainment.

The residential and retail growth in Madison continues to lure retailers from all over the country to this quaint, charming community. With the addition of Wal-Mart and a newly constructed Lowe’s Home Improvement Warehouse, Highway 463 has exploded with new construction and retail opportunities. Main Street is peppered with a variety of small strip centers offering Madison residents a one of a kind shopping experience from a variety of national and local merchants. An upscale 17-screen movie theater, operated by Malco theatres, has recently opened its doors, and will anchor an approximately 850,000 square foot retail development on Grandview Boulevard. Opening in late 2007, Madison Grandview will be home to a variety of shops, restaurants, and indoor/outdoor entertainment. Anchored by Home Depot, Colony Crossing on Highway 463 has added a number of lively restaurants and retailers to their tenant mix. Expansion plans for Madison are plentiful and signify that this city will continue to grow and flourish.

— Taylor Rhea is a leasing agent, specializing in retail developments with Jackson, Mississippi-based Mattiace Properties, Inc.

Multifamily Market

The 10-story Electric 308 building, which underwent a restoration last year, is topping the Jackson multifamily market with rents that exceed $1.20 per square foot. © Sheridan@Decodarkroom.com

Two downtown historic restoration projects were completed last year. The 12-story Plaza Building and the 10-story Electric 308 are topping the market with rents that exceed $1.20 per square foot and maintained waiting lists long before completion. Both offer luxury, loft-like units but have clear delineations between living and sleeping areas. Tenant amenities like shared party rooms and roof terraces were incorporated. The projects have also focused heavily on ground floor restaurants with a total of five between the two buildings.

New convention facilities, an office market that recently topped 93 percent occupancy and 34 neighborhood restaurants had been driving downtown’s resurgence. However, these two residential developments have proven the market for a pedestrian-oriented, urban lifestyle in Mississippi.

This summer, the 72-unit Town Creek Apartments will break ground. This project will link Mississippi College’s School of Law to Performa Entertainment Real Estate’s Farish Street Entertainment District. As well, two additional mixed-use, new construction projects are planned that will incorporate for-sale condominium units in the upper floors of office properties.

Fondren Corner, a mixed-use development by Peters Real Estate and Mattiace Properties, has become an icon for Jackson’s Midtown area. This project and the surrounding commercial real estate make up the Main Street neighborhood and have created Central Mississippi’s arts district.

The area is experiencing tremendous growth from the University of Mississippi Medical Center, Baptist Hospital and other medical district anchors. Three historic single-family neighborhoods converge on this area. The Flats at Fondren Place, a new condominium/retail development, is a proposed restoration of a historic school. This project will be the first large-scale mid-rise development with units for sale by offering 60 condominiums. Parking decks will be added to support the residents and 20,000 square feet of office space and ground level retail. Plans call for the project to break ground this year.

In the adjacent Belhaven neighborhood, another developer is implementing a similar mixed-use model for a new project. The multifamily portion will offer an alternative to the established single-family lifestyle and should break ground next year. Additionally, densities should allow for expansion of retail beyond the established Fondren town center.

Based on studies of peer cities, demand exists for up to 1,400 multifamily units in Jackson’s core. Three primary forces are driving development in the area. First, the national trend toward urban living is not foreign to Mississippians who have traditionally been familiar with walkable town squares and centralized meeting places. Second, suburban markets are zoning out multifamily development and portions of Jackson have been under construction moratoriums. Finally, land availability, coupled with new financial incentives, are improving the prospective cash flow for these projects.

— Mike Peters is a broker and president of Jackson, Mississippi-based Peters Real Estate.

Industrial Market

The Jackson metropolitan area of Hinds, Rankin and Madison counties has seen significant industrial development during the last 4 years, mostly as a result of Nissan Motors locating its $1.43 billion dollar automotive manufacturing plant on Interstate 55 near Canton in Madison County. Tier 1 and 2 suppliers to Nissan have built more than $1.5 million square feet of new manufacturing, assembly and/or warehouse facilities on the Nissan property or nearby in the Madison County Economic Development (MCEDA) industrial park. In addition 381,000 square feet of existing warehouse space has been utilized for Nissan related activities. Currently there is approximately 1 million square feet of warehouse space available in Madison County ranging in size from 5,000 square feet to 250,000 square feet for new or expanding businesses.

In the city of Jackson and in Hinds County, several large vacant properties have taken on new life in recent months. Belk, Inc. purchased the 174,000-square-foot former McRae’s distribution center in the Greater Jackson Industrial Park at Byram. Pilgrim’s Food Systems Distribution is occupying the 75,000 square feet refrigerated warehouse, formerly owned by McCarty-Holman Company, in the Hawkins Field Industrial Park. Fred Jones Enterprises, a distributor of Ford powertrain parts, bought an 87,500-square-foot warehouse and distribution center at 545 Ford Avenue in the Hawkins Field Industrial Park. This acquisition will enable Ford to consolidate its New Orleans and Memphis distribution into Jackson by the end of the year.

Monroe, Lousiana-based Roofing Supply Company recently leased a 48,000-square-foot warehouse at 250 Commerce Park. This property was vacated by Copper Sales, who moved to larger quarters in the Greater Jackson Industrial Park at Byram.

Vacant space in the Hawkins Field Industrial Park continues to dwindle as businesses relocate to the area. In the past year, the park has gained more than an half dozen new businesses and others have expanded their operations. In 2001, Jitney-Jungle declared bankruptcy and vacated more than 2 million square feet of space in the park, which has now all been leased or sold except for 500,000 square feet. A new interchange on Interstate 220, completed last year, at Industrial Drive, has contributed greatly to heightened interest in the Hawkins Field area. However, no new warehouse/distribution or manufacturing facilities are currently under construction in the city of Jackson or in Hinds County.

Rankin County continues to be a go-to location for new Jackson area development. Brown Bottling Group, Jackson’s Pepsi bottler, recently announced plans to move its bottling, distribution and vending machine center to the East Metropolitan Center in Brandon. The company acquired 29 acres in the industrial park on Mississippi Highway 18 from Rankin First, the county’s economic development group. Brown Bottling expects to invest approximately $20 million once the move to consolidate its Jackson operations is complete.

JB Hunt Transportation, a nationwide trucking firm, has plans to acquire 12 acres, in the Richland area off U.S. Highway 49 South, for a new truck terminal to be completed in early 2007.

Mississippi Baking Company, who supplies more than 100,000 dozen buns to 1,200 McDonalds daily, recently completed an $8 million, 31,526-square-foot addition to its Pelahatchie plant.

Warehouse Central, a third party full-service commercial warehouse operator, has begun a 400,000-square-foot warehouse development at Country Place off Airport Road at Interstate 20 in Pearl. The first 40,000-square-foot dry storage building has been completed and is currently occupied. Future plans call for cold storage and climate control warehouses.

Rankin County currently has very little vacant warehouse/industrial space with most of it in two larger buildings, Trilogy Communications’ 200,000 square feet in Flowood and the former International Paper 60,000-square-foot warehouse in Richland.

— Bill Cook, CCIM, is the owner/broker of Jackson, Mississippi-based Cook Commercial Properties.

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