The U.S. will exhibit positive indicators in 2025 as Q4 2024 presented positive net office absorption for the first time since Q4 2021.
For three consecutive quarters, office leasing volume has established a new post-pandemic high, with Q4 2024 volume reflecting 92% of pre-pandemic averages.
Availability rates have declined for two consecutive quarters, giving reason for optimism that declines will continue through 2025.
Transactions are trending toward renewals/expansions vs. first-generation new leases/relocations, and the rate of downsizing is settling as firms normalize footprint requirements and attendance protocols, resulting in an average among the Fortune 100 of 3.4 days per week in office, with only 1% of such companies fully remote.
While executive sentiment continues trending in favor of in-person work, fostering collaboration and culture, executives are focused on the quality of the building and workspaces their staff will occupy.
Demand for higher quality, amenitized buildings continues to outpace older, commodity product. This is compounded by a reduction in the supply of office, as new construction has declined significantly while older buildings are targeted for redevelopment/conversion.
Jacksonville embodies these macro trends and stands well positioned as we, like many Sun Belt peers, enjoy a high quality of life, relatively low cost of living, business-friendly environment, and significant momentum for the activation of Downtown to include the Jacksonville Jaguars stadium renovation and a new University of Florida graduate campus, among other widely reported development projects on both sides of the river.
Office vacancy in Jacksonville currently hovers 21% to 24% with lower vacancy attributable to Class A and higher vacancy for Class B; these rates sit slightly above national averages but are overall similar to many other U.S. markets.
Anecdotally, we’re encouraged by full parking lots and long lunch lines.
We are also encouraged by large transactions such as Citizens Property Insurance Corp.’s pending facility decision (200,000 square feet of space), ICE’s acquisition of the Merrill Lynch Campus (590,000 square feet), and Citigroup’s retention of 230,000 square feet via a long-term lease following a sale-leaseback of its Flagler Center campus.
While these larger deals serve as positive bellwethers of demand from corporate users, we’re also seeing healthy activity under 10,000 square feet, particularly in the 2,500-5,000-square-foot range.
Landlords with vacancies 3,000 square feet or less should build move-in ready spec suites as groups this size will be hesitant to wait for occupancy. The design should be contemporary and efficient, emphasizing window line and natural light.
Mack Keasler is a member of the NAIOP Commercial Real Estate Development Association Northeast Florida Chapter.