Douglas Blair

Jacksonville, Florida’s business environment is thriving because of public-private partnerships, regional cooperation and the advantages of consolidated government within the city of Jacksonville and Duval County. Civic and business leaders work to make Jacksonville an easy and ideal place to start, relocate, conduct and develop a business.

In addition to the city’s pro-business approach, there are also direct cost advantages of doing business in Jacksonville. Affordable and diverse real estate opportunities, low construction and utility costs, advanced technology infrastructure, the consolidation of utilities under one low-cost public provider, business incentive programs, an educated workforce and an almost unrivaled intermodal transportation system continue to make Jacksonville the perfect home for companies in a wide range of industries.

Jacksonville also maintains a strong military workforce at the Jacksonville Naval Air Station and the Mayport Naval Base. The city’s unemployment rate does not take into consideration the more than 4,000 workers who exit the Navy each year locally and look to apply their aviation, electronic, technical and maintenance skills with Jacksonville-area companies. In addition, Jacksonville’s workforce draws on a number of universities in the region for a variety of business and knowledge-based disciplines.

Industrial Market

With one of the lowest vacancy rates among metropolitan areas in Florida, the Jacksonville industrial market has grown more than 26 percent since 1995 to its current level of 80.5 million square feet of existing industrial properties.

The vacancy rate in the warehouse market moved from 6 percent in 1999 to 8.7 percent in 2002, and currently resides at 9.9 percent. An overall stabilized vacancy of 8.5 to 9 percent is projected for 2004. The average asking rental rate for warehouse space was $3.90 per square foot in 2000, up 3.9 percent from a year earlier. 2001 and 2002 rates fell to $3.80 per square foot on a triple net lease and currently reside at $3.63 per square foot.

Flex space rates have stabilized at $8.83 per square foot, with an overall decline in the vacancy rate of 17 percent for the current quarter. Of the 3 million square feet of flex space existing, the majority of this space is located in the Southside submarket.

The softening rates in the market are temporary and Jacksonville will continue to be a healthy market. Construction is slower than in previous years, though investors are looking in Jacksonville to invest for stable returns. Construction cost analysis versus other markets as well as lower utilities cost is also another plus for developers and users alike. Speculative building has slowed, but the trend of speculative building will continue in the Westside and Southside areas. Multiple projects are pending for speculative space to be moved to the construction phase in the Westside area.

Adjoining St. Johns County has its fair share of industrial potential. Con-Agra has completed construction of a 400,000-square-foot distribution center on a 170-acre site at St. Augustine Industrial Park, in the southwest quadrant of Interstate 95 and State Road 207. Other developments of regional impact (DRIs) that can be seen in the region reflect this area’s true growth potential.

Northside Submarket

The Northside industrial submarket consists of 14.48 million square feet of predominately bulk distribution space with an average rental rate in the $3.50 per square foot range on a triple net lease.

Northside projects include Stone Mountain Industrial Park Inc.’s 362-acre project called Northpoint, consisting of mixed-use warehouse and residential. At maturity, the total project would consist of 3 million square feet of industrial buildings. Other additions include Imeson International Industrial Park’s plans for an additional 280,000-square-foot warehouse off Whitaker Road and Seally & Company’s addition of a 135,000-square-foot warehouse at Jacksonville International Tradeport.

Westside Submarket

With 30.08 million square feet of industrial space, the Westside is Jacksonville’s largest industrial submarket, predominately consisting of manufacturing and distribution facilities. Rental rates range from $2 to $3 per square foot for older facilities on a triple net lease and $3.25 to $4.25 per square foot for new facilities on a triple net lease.

Westside projects include Stone Mountain Industrial Park Inc.’s 111,000- and 189,000-square-foot facilities located in the Westside Industrial Park. Other speculative construction being completed includes a 440,000-square-foot warehouse in the same location.

Pattillo has been seeking city approval for a multi-structure 1.08 million-square-foot warehouse facility between Chaffee and Jones roads. The facility, near Interstate 10, will be called Beaver Street Industrial Park. Southeast Toyota Distribution center has completed a 311,000-square-foot processing facility located at the Westlake Industrial Park. W.W. Granger is constructing a 230,000-square-foot distribution center in Westside Industrial Park.

Perimeter West Industrial Park is planned on a 163-acre site. Currently, a 135,360-square-foot building is located at Interstate 295 and Pritchard; Pizzuti Construction Inc. built the facility. Infoguard leased 90,000 square feet in 2002 at this location. At maturity, Perimeter West will contain 1.2 million square feet of industrial space. Another pending project is Park North, a 330,000-square-foot industrial and a 55,000-square-foot commercial center near I-295 and U.S. 1.

Westside industrial submarket transactions include several Westside Industrial park leases: 62,000 square feet to Sysco Foods, 62,000 square feet to Reliable Automotive, 30,500 square feet to JanPak and 73,268 square feet to Blue Cross and Blue Shield of Florida. In addition, Hallmark Partners Inc. leased 72,000 square feet at 1720 Lewis Industrial Dr. to Unidar Inc. and CF Gomma leased 160,000 square feet at 6630 Broadway Ave. for an auto parts manufacturing and distribution center.

Southside Submarket

The majority of Jacksonville’s overall growth continues to be in the Southside. The Southside industrial submarket consists of 18.41 million square feet of warehouse space and 2.62 million square feet of flex space. It also has the highest concentration of planned and existing flex projects.

Blended rental rates for flex space averaged out at $8.75 per square foot on a triple net lease. Rental rates for warehouse/distribution space averaged $3.50 to $4.50 on a triple net lease.

Southside projects currently underway include Pilot Pen Corporation’s construction of a 230,000-square-foot distribution center in EastPark, and Envirosafe Techonolgies’ two-building, 52,800-square-foot project located off St. Johns Industrial Parkway. The second phase of construction for EastPark is pending and when completed will yield 282,000 square feet.

Group IV Avenues Inc. is developing a four-building, 109,733-square-foot office/warehouse center in Southside, adjacent to its Florida Mining Industrial Center. Once complete, the projects will become the Avenues North Commerce Park. There are currently 10.75 acres along Florida Mining Boulevard West under contract by Flagler Development Company.

Jacksonville’s International Airport

The Jacksonville International Airport (JIA) Free Trade Zone (FTZ) has 143 acres for use on demand and has experienced FTZ operators. It is located at the crossroads of two major interstates (10 and 95) and is within an 8-hour drive of 33 million consumers. JAXPORT has recently built two new air cargo buildings: a 50,200-square-foot facility and an additional 99,000-square-foot building. Combined, these facilities have more than tripled the amount of covered air cargo space at the airport to 215,000 square feet. Air cargo operators at JIA moved more than 147 million pounds of air cargo in 1999, 134 million pounds in 2000 and 134 million pounds in 2001. JIA also welcomes more than 5 million passengers annually to choose from more than 215 daily flights daily in its two-level terminal building. In addition to JIA, the Jacksonville Port Authority also owns and manages three regional airports: Craig Airport, Herlong Airport and Cecil Field. Strategically located throughout Jacksonville, all these facilities serve Northeast Florida and Southeast Georgia. JIA also has expansion plans on the table that would include a satellite terminal and an additional runway.

Office

Jacksonville’s office market has fared better, in many aspects, than many comparable markets. Nevertheless, the turnaround from the downturn has been slow. The market has seen a quarterly 1 percent increase in vacancy for the past four quarters. Speculative construction has been on hold and is projected to remain that way until occupancy increases in the Class A office markets. At present, there remain few build-to-suit projects under construction. The completion of all remaining build-to-suit projects will increase the market size by 300,000 square feet in Class A office space. The build-to-suit projects are tenant-driven, multi-tenant buildings, resulting in additional user space coming on line upon completion of these projects.

Of Jacksonville’s 33.7 million square feet of office space, roughly 10 million square feet is owner occupied, leaving 23.7 million square feet of rentable building area. The overall vacancy rate for the non-owner occupied space is 19.8 percent, including sublease space. This rate is up 3.32 percent from end of fourth quarter 2002. This rate is also the high of a 4-year increase. Of all the space available, more than 400,000 square feet is new versus secondhand space.

Sublease space being a key factor in many markets, Jacksonville has more than 400,000 square feet, which translates to a 1.7 percent factor in vacancy. Sublease space has been holding at 1 to 2 percent of the total market area for the last year. Absorption versus corporate downsizing, consolidations and layoffs has been near equal. Most deals occurring in the market range from 2,000 to 10,000 square feet, but large deals are appearing in the 50,000-square-foot plus range.

The CBD has seen an increase in vacancy of Class A space with a current rate of 20 percent with average asking rates of $19.44 per square foot. Humana’s departure at 76 South Laura St. resulted in 300,000 square feet of vacant space, which contributed to the current increase. St. Joe’s new riverfront headquarters at 245 Riverside Ave. has been completed. St. Joe will occupy the top floor of the 140,000-square-foot Class A building and lease out the remaining space. This is the first Class A to be built in the CBD since 1990.

On the other hand, Fidelity National Financial’s headquarters is moving to Jacksonville. The company purchased Alltel Information Services Inc. for $1 billion in April. Fidelity is also planning to build a six-story, 150,000-square-foot building north of its present tower. With this transaction, Fidelity owns the 560,000-square-foot building in Riverside plus an adjacent lot and has plans to expand.

Suburban Class A vacancy is currently 18.49 percent, with a range of asking rates holding between $17.75 to $19 per square foot. WaterView Office Park is the latest addition; completion of the park will result in 170,000 square feet in two buildings. The first tenant is RS&H, occupying 55,000 square feet. Nearby, Flagler Development is adding its third building at Deerwood North; this 113,000-square-foot building is expected be completed by January 2004 and was moved into action by a 60,000-square-foot lease with Main Street America Group/Grange Mutual Insurance.

Chase Manhattan Mortgage added 41,000 square feet in a lease expansion and renewed a 138,000-square-foot lease at Deerwood South office park. Furthermore, Nuvell Financial Services Corporation leased 123,298 square feet in Flagler Center, formerly Gran Park.

The cost of office land in Jacksonville is between $5 and $8 per square foot. There exists more than 5.5 million square feet of entitled rights for office construction and more than 11 million square feet in pending or recently approved DRIs. The ability for a developer or company to move from land acquisition to construction completion can take place within 12 to 14 months.

Consequently, the consensus remains that the softening downward turn is beginning to stabilize. In addition, minimal new hiring and few corporate expansions will likely prolong the stabilizing cycle for the next 6 to 9 months before an upward trend will begin. Jacksonville is still considered a tenant’s market with aggressive lease rates being offered, higher than normal tenant improvements dollars being allotted and free rent offered as a signing bonus.

The prime growth area for office construction is still in and around Southside’s JTB Corridor extending down to the 9A and U.S. 1 interchange, even though other adequate sites exist within Jacksonville.

More on Jacksonville

Jacksonville is becoming a major city on everyone’s map. It has multiple assets and is diverse in many aspects of its economic, social and geographical environment. There are many concrete reasons that Jacksonville continues to be ranked the Number 1 place to relocate or expand in 2003.

Jacksonville is a major telecommunications hub for the Southeast; this will only increase with TeraSpace Networks’ $80 million Network Access Point (NAP) project at Jacksonville International Airport. An NAP is an Internet interconnection point that serves to tie all the Internet access providers together.

Jacksonville’s downtown redevelopment project, called the Better Jacksonville Plan, is a $2.2 billion project or series of projects. Jacksonville’s new U.S. Federal Courthouse is finishing construction and is another government addition to the downtown area.

The overall redevelopment project focuses on multiple road improvements and restructures land use, along with other resources, to maximize Jacksonville’s economy and quality of life. The plan includes revitalizing the downtown community and gears 10,000 people to live in the heart of the city.

An additional project for the CBD is The Shipyards, located on the Northbank. This $860 million redevelopment project consists of housing, office and retail space.

Douglas Blair is an associate with Colliers Dickinson in Jacksonville, Florida.

Jacksonville’s Multifamily Market Multifamily trends in the greater Jacksonville area include a slowing in construction due to a number of newer high-end apartment projects coming out of the ground in the last 18 to 24 months. However, overall occupancy is strong at approximately 94 percent. In the central business district, acquisitions and renovations have been active with such projects as Berkman Plaza, One Shipyard Place and The Carlington, offering units for sale as well as for lease. One of the newer developments coming into the market is Bartram Park Apartments. Daniel Corporation is developing Bartram Park as a $32 million, 380-unit apartment complex on Jacksonville’s southside, which is home to the majority of new development in North Florida. Bartram Park neighbors the Flagler Center Business Park, which features anchor tenants Baptist Medical Center and Citibank. Rental units in Bartram Park Apartments are scheduled to become available in summer 2004. While the majority of the multifamily development is on the south side of Jacksonville, following the growth of office developments such as Southpoint Business Park and Deerwood Center, the Better Jacksonville Plan has had the effect of rejuvenating many other areas of the city such as east and west Jacksonville. These areas could reap investment rewards in the future due to overbuilding on the south side and the lack of incentive dollars in that area. Jacksonville is seen nationwide as stable without the peaks and valleys that other cities experience. Jacksonville is on the radar screen of many national companies with more than 100 purchases of multifamily properties in 2001 and 2002. With interest rates at the lowest in recent memory and with Jacksonville’s plans to host the Super Bowl in 2005, look for the city to continue as a destination location for investment. — Sidney O. Jones, CCIM, is vice president and multifamily specialist at Coldwell Banker Commercial-Nicholson Williams Realty in Jacksonville.

JACKSONVILLE’S RETAIL MARKET Jacksonville is a hot commercial real estate market with a variety of retailers entering and expanding in the market. Kohl’s is one of several retailers rumored to be considering the vacant 115,000-square-foot space formerly occupied by Montgomery Ward at Regency Square Mall. Cost Plus World Market has announced plans to open four stores in Jacksonville by next year. The sites are tentatively set for Jacksonville Beach, Clay County, Mandarin and Regency. Lowe’s has opened a store in Fernandina Beach, begun construction on a store in Jacksonville off of I-10 and plans for a third store on the city’s south side. Both Wal-Mart Supercenter and SuperTarget have proposed stores at Beach and Hodges boulevards. Wal-Mart may occupy the southwest corner in a proposed 375,000-square-foot center on 42.4 acres. The SuperTarget would be developed on 47 acres on the southeast corner. Sleiman Enterprises is negotiating to develop Hodges Pointe, the Wal-Mart-anchored center. Sleiman Enterprises also has a contract to buy the property where the SuperTarget center will be developed. Winn-Dixie and Publix have announced several new locations. Winn-Dixie will anchor a new neighborhood center at the corner of Henley and Sandridge Road in the Lake Ashbury area. Now that the last parcel of property has been approved for rezoning, Publix will anchor the Palm Valley shopping center at the southeast corner of Mickler and Palm Valley roads. The Sembler Company is developing the Publix-anchored center. Residential growth is leading commercial development throughout the city. On Jacksonville’s west side, Oakleaf Plantation is under construction at the Duval-Clay County line. Proposed plans for Oakleaf include 11,000 homes, a regional mall and a golf course. The community will include office and industrial development, as well as five schools. Publix is capitalizing on the growth and plans to open a supermarket at Oakleaf. Just north of Regency Square Mall, a $150 million development is proposed. If approved, the development will include condominiums, single-family homes, a hotel and commercial property. The development, called Kendall Town Center, is bordered by Monument Road, Florida 9A and the Southside Connector. The 300-acre commercial and residential development will be designed to resemble a southern coastal town. — Lynn Leonard, vice president – marketing, NewBridge Retail Advisors.

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