Jacksonville’s industrial, office and retail markets are experiencing the effects of the COVID-19 pandemic that led to shutdowns, capacity restrictions and other effects. Some sectors fared better than others. Here is what CBRE, Colliers International, Cushman & Wakefield, JLL, NAI Hallmark and Newmark Phoenix Realty Group are saying about the market as of the second quarter of 2020.
Office rental rates were flat, up or down, depending on the report, but the average was within a tight range of $20-$22, not much different than the year-end range of $20-$23.
Overall vacancy rates were 8.8% to 16%, generally up from year-end.
“Jacksonville’s office market as well as the rest of the United States is in a time of uncertainty and has slowed down, and existing occupiers are reevaluating their footprints,” said Colliers International.
Colliers said that few creditworthy tenants asked for rent relief because of the pandemic and hardly any are receiving it because landlords “don’t see the economic necessity and are content letting their tenants make adjustments to their variable operating expenses first.”
The reports said the largest leases signed in the second quarter were Fanatics for about 120,000 square feet among two Southside buildings; 31,600 square feet for Terracon in Baymeadows; the Department of Veterans Affairs for almost 22,000 square feet along University Boulevard South; Ascension St. Vincent’s for 20,000 square feet along Salisbury Road; and Claims Questions LLC for about 16,000 square feet along Cypress Plaza Drive.
New construction included approvals for Fidelity National Information Services Inc. to build its headquarters along Riverside Avenue and plans for JEA’s headquarters Downtown. Another build-to-suit project is the PGA Tour headquarters in Ponte Vedra.
The only speculative construction reported was in St. Johns County, where VanTrust Real Estate LLC is building a speculative 125,000-square-foot office building and International Management Co. is developing an almost 63,000-square-foot spec structure.
“The two Class A buildings bring much needed Class A space to the submarket,” CBRE said.
It predicts that with the lack of “quality large blocks of space,” office users might opt for build-to-suit projects.
Cushman & Wakefield found that new leasing in the second quarter was predominantly in older Class B assets, with only 10% of leasing in Class A buildings. Suburban submarkets drove the bulk of leasing, with about 15% in the central business district Downtown.
JLL said Jacksonville tenants contending with a near-term lease expiration are in the market and looking for a cost-effective solution to weathering the next several quarters, usually meaning a short-term renewal.
Some new tenants are on hold.
“The quelling of the virus and the ensuing employer sentiments surrounding work-from-home are critical in shaping the future for office real estate,” JLL reported.
All indicators point to an eventual return to the office, it said, but the timeline remains unclear.
“While the coronavirus pandemic will cause significant economic disruption in Jacksonville, the market may be one of those best poised for recovery in Florida,” said the Newmark Phoenix Realty Group report from CoStar.
The real estate firms cited as strength the area’s relatively lower dependence on leisure and hospitality jobs; the stability of the port, trade, transportation and utilities market; and the strong presence of medical services and military jobs.