This year looks like it should be a stable one for Jacksonville commercial real estate, characterized by the continued unwinding of some noteworthy post-pandemic distortions.
The 2021-23 period brought an incredible boom in certain niches of the market as developers and occupiers raced to capitalize on a migration surge, supply chain disruptions, accelerated investment into vaccine development and other pandemic-driven trends.
Simultaneously, the office market experienced a startling decline, reflecting the perception that the office might be a thing of the past.
Fast forward to 2025 and the pendulum has swung back from the extreme. Owners of office properties are cautiously optimistic that the worst might be over, as both employers and the new administration alike enact return-to-office mandates and some institutional investors reconsider their flight from the sector.
Meanwhile, new investment in the properties that led during the pandemic-era boom has slowed in response to rising vacancy rates following years of development that outpaced demand.
To properly judge what 2025 will be like, it is also important to consider these fundamental operating trends in the context of the 2025 macroeconomic landscape.
Gross employment and population in Jacksonville, both critical macroeconomic drivers of commercial real estate, grew quickly immediately following COVID, pushing vacancy rates down and prompting the development of new supply. Historically low interest rates added fuel to this fire.
Today, the picture is different. Preliminary estimates show that both the labor force and gross employment have been flat for roughly a year. The 10-year Treasury – a benchmark for commercial real estate cost of capital – has been range bound between 4% and 5%, compared with nearly zero during the pandemic boom. This dynamic dilutes cash flow and reduces sale multiples, sidelining all but the most determined and well-capitalized developers.
The impact of potential tariffs and other dramatic changes in policy could also have serious consequences for the economy and the commercial real estate market. The hope in the industry is that any tariff impact would be offset by tax cuts to keep the consumer as insulated as possible but only time will tell.
Despite obvious uncertainty and challenges, the long-term case for commercial real estate in Jacksonville has not changed.
Migration trends, cost of living, lifestyle and logistics are all still major tailwinds. But we have reached a point that might be best described as a cyclical reset: a time to focus on absorption, maintaining or growing occupancy and allowing the markets to get used to what normal feels like.
Christian Oldenburg is president of the NAIOP Commercial Real Estate Development Association Northeast Florida Chapter.