CITY HIGHLIGHT, DECEMBER 2007

JACKSONVILLE CITY HIGHLIGHTS
Collis McGeachy, Lea Court and Jeff L. Graham

Jacksonville Retail Market

In spite of the slow down in the housing market, the retail market in Jacksonville has continued to expand in 2007. Local job growth and low unemployment rates combined with in-flow population migration into northeast Florida are helping to drive development in Jacksonville.  Several large developments opened this year: Ramco Gershenson’s River City Marketplace, a 1.3 million-square -foot center near the Jacksonville International Airport which includes Wal-Mart, Lowe’s and a 14-screen Hollywood theatre; Kimco’s Plantation Plaza, a 344,000-square-foot center in south Orange Park anchored by Home Depot; The Sembler Company’s Oakleaf Town Center, a 866,000-square-foot center on the Westside anchored by Super Target, Home Depot and Kohl’s; and Kimco’s Pablo Creek East, a 277,000-square-foot center that includes Super Target, Michael’s and Office Max. Rents have remained stable and vacancy rates are in the 5 percent range, both of which have also helped drive growth.

Retail projects currently under construction include Phase II at Simon/Ben Carter Properties’ St. Johns Town Center, which is slated to open fourth quarter. Phase II will add another 228,000 square feet to the 1.1 million-square-foot upscale hybrid lifestyle/community center, and will include several high-end retailers and restaurateurs, such as Tommy Bahamas, Louis Vitton, Lacoste and Capital Grille, that are new to the market. Also under construction is Kimco’s Avenues Walk, a mixed-use urban village consisting of 600,000 square feet of retail, 400 hotel rooms and 1,050 residential units. Both of these lifestyle centers are located in the southside submarket which is Jacksonville’s largest retail area and serves not only Jacksonville but neighboring Ponte Vedra Beach and St. Augustine.

Ben Carter Properties recently announced two new retail projects in St. Johns County: Market at Town Center, a 280,000-square-foot center adjacent to St. Johns Town Center; and  Esplanade, a 1.2 million-square-foot lifestyle center that is expected to open 2010 in north St. Johns County. Also in north St. Johns County, Weingarten Realty is developing Lion’s Gate at World Commerce Center, a 750,000-square-foot open-air center that is slated for opening in mid-2009. Anchor tenants for these  projects have yet to be announced.

Big-box retailers active in the market include Publix, Wal-Mart, Home Depot, Lowe’s, Beall’s, Target, Office Depot and Kohl’s. New retailers entering the market included Gander Mountain and Hobby Lobby, as well as Whole Foods Market, which is slated to open its first store in the Mandarin submarket in 2008.

The retail outlook for 2008 is unclear at this time due to the stagnant condition of the housing market, the uncertainty of the holiday sales projections for retailers and the pending national election in 2008. It is anticipated that new retail projects will continue to be built throughout the entire Jacksonville MSA as the housing market stabilizes.

However, a positive note for the local Jacksonville economy is the expansion of major terminal operations by Mitsui  O.S.K. Lines and Hanjin Shipping. The new intermodal distribution points will further expand Asian trade routes to the United States. Both projects should be up and running by 2010 or 2011, and will create upwards of 9,000 jobs with a projected economic impact of $850 million to the northeast region of Florida.

— Collis McGeachy is vice president and Lea Court is director of leasing in the Jacksonville, Florida, office of CB Richard Ellis.

Jacksonville Industrial Market

As the growth of JAXPORT continues to explode, so does industrial real estate. The imminent arrival of Mitsui O.S.K. Lines in late 2008, and the recent announcement that the Jacksonville Port Authority has entered into a memorandum of understanding with Hanjin Shipping Co. Ltd., which could open a terminal by 2011, could push Jacksonville into the top tier of port cities.

Not only is Jacksonville seeing more industrial projects, these projects are larger than ever. In order to take advantage of the port growth, several new developers and companies have set their sights on northeast Florida. Developers such as Trammell Crow Company/ING Clarion, Graham & Company Southeast, Majestic Realty Corp., ProLogis, Duke Realty, Cabot Partners and Johnson Development Associates are all bringing industrial projects to the area. New industrial development is primarily taking place on the west side and north side of Jacksonville, which are the largest industrial sectors in this market. However, Graham and Company has its sights set on St. Augustine with the First Coast Distribution Center. The estimated combined impact of new development to the Jacksonville area is expected to be more than 6 million square feet.

During the course of the next 12 months, Jacksonville will see several build-to-suit projects either coming out of the ground or reaching completion. Duke Realty has plans to develop a 820,000-square-foot distribution center in the Westlake Industrial Park for Unilever. A 817,000-square-foot distribution center is being constructed for Samsonite in Imeson Industrial Park by Webb International, and Sears Logistics Services is expected to occupy another massive distribution center, 815,000 square feet, developed by Pattillo Construction. In addition, a 260,000-square-foot distribution center is on the drawing board for an automotive parts distributor.

With the entry of new industrial players, acquiring viable industrial land that has zoning, concurrency and development rights has become a challenge. In addition, wetlands and tree mitigation are issues that are also plaguing industrial developers. Since most good sites have been gobbled up, industrial land values are at an all-time high. In some cases, land values have tripled over the last 24 months.

The recent activity has led to a drop in vacancy rates and a rise in rental rates. Currently, about 87 million square feet of industrial space is being tracked. This includes about 9.9 million square feet currently being marketed or 11.5 percent of availability. Activity for the third quarter was 2.8 million square feet, which translated into 1.9 million square feet of positive absorption. This year is trending towards a record year in activity and absorption. Rental rates, as a whole ,continue to rise and are up more than 10 percent from last year. As land becomes more scarce and more businesses move their operations into the Jacksonville area, the industrial sector will continue to grow even hotter in the sunshine state.

— Jeff L. Graham, SIOR, is president of Jacksonville, Florida-based King Commercial Realty/CORFAC International.

Jacksonville Multifamily Market

Jacksonville continues to see tremendous growth over several industries and is projected to gain around 22,000 jobs this year with an even brighter future on the horizon. The multi-family market is no exception. Torto Wheaton Research found Jacksonville to be a leader in rent rate growth with 4.5 percent in 2007. Currently we are seeing an up-swing of growth in several submarkets including Southside, Westside, and Northside. It is also important to note that Jacksonville’s Shadow Market is insignificant as the majority of units were absorbed by end users, not investors. This further establishes Jacksonville’s strength as an excellent Multi-Family market and paves the way for continued expansion. Along with increasing population, sustainable rent growth, and job growth our market continues to be one of the strongest in Florida.

Not only are we seeing an increase in population and jobs in Jacksonville, but an increase in resident’s income levels as well. With the highest average household income in Florida, Jacksonville ranks third in the nation for quality of jobs as reported by Forbes Magazine. Combined with a lower cost of living over other major Florida metropolitan areas, Jacksonville residents are likely to see rents increase as the job market continues to soar. As employers pay more, residents will expect more in the way of amenities and location. Properties like The Strand downtown are a perfect example. There are also a few Southside properties currently under construction that offer homes within walking distance of Saint John’s Town Center Mall, and Deerwood Park Business Center, a 14 million square foot office Park home to companies like Bank of America, Merrill Lynch, and Blue Cross & Blue Shield.

West of the Saint Johns River, we are seeing a similar trend to what was happening on the Southside about 3 years ago. Plans are underway for new projects including Cecil Commerce Center, a multi-million dollar Office and Industrial Park as well as Oak Leaf Plantation a mixed residential and golf course community in Orange Park. These projects stand to revitalize the area with Cecil Commerce Center spending millions in infrastructure improvements already.

Northside is seeing continued growth in the Jacksonville Port with the Mitsui expansion well underway. Hanjin, another port deal currently in the works, stands to bring an additional port expansion online that would bring 8,800 jobs to the area. Combined, these two additions would make Jacksonville’s port the 2nd largest on the eastern seaboard paving the way for an industrial and service industry renewal. As residents move north to fill these jobs the demand will increase for apartments and retail. We are already seeing new retail in the form of River City Marketplace near the Jacksonville International Airport.

Southside remains a tried and true performer with continued job production. As mentioned there are new construction projects going up along J. Turner Butler Blvd. as well as A.C. Skinner Parkway. The Saint John’s Town Center Mall Phase 2 expansion will be completed in the coming months adding even more draw to the town’s retail hub. Southside Boulevard will also see retail improvements in the form of Avenues Walk, which will add shopping and apartments in the area surrounding the Avenues Mall. This retail is a result of a solid Multi-housing market in Southside Jacksonville that will continue to flourish with these recent additions.

Jacksonville’s multifamily outlook during the next few years is extremely promising. Few places in America allow residents state of the art medical care, progressive city government where the city has been annexed to the county as a truly diversified economic base, a consistent job engine combined with a comfortable southern quality of life and the financial perks of a major east coast city.

—Jacksonville Multifamily Housing Division: Dan Allen, Dhaval Patel, Trip Gillander, Grant Momberg and David Moran contributed to this article.

©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.