April 08, 2022 Why things are look up for Jax office market
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Jacksonville’s office sector of commercial real estate is in a strong position to take advantage of continued population and business growth in the metro area, says one CRE professional.
Even though the pandemic impacted office a bit harder than other CRE sectors, JLL’s Michael Loftin said there have been some good wins in the local office market over the past year.
“Even in the face of all of that's happened, there's still been some good transactions, some good announcements in Jacksonville over the last year," Loftin said.
These include high-profile headquarters relocations like Dun & Bradstreet and Nymbus but also several local business expansions that have a big impact on the metrics.
"We had a lot of good organic growth from local companies. Jacksonville is a relatively small office market when you look at the total code size as compared to MSAs like Orlando, Tampa and South Florida," Loftin said. "So in our market, a 40,000-square-foot expansion of a group that's currently in place is a great deal for Jacksonville. It's a good news story, but it's also impactful and beneficial for the fundamentals of the office market here."
Loftin said the vacancy is up overall, but a big part of that is from vacant space from Prudential and CSX hitting the market.
JLL's fourth quarter report shows overall vacancy in Jacksonville office space stands at 22%.
That being said, Loftin said he's noticing tenants beginning to commit to more traditional leases and renewals again, which had slowed a bit when the pandemic hit.
"They are seeing the light at the end of the tunnel," he said.
Hybrid work should continue to be common, he said, but the office still plays such a key role in company cultures.
"It's a very competitive labor market right now," Loftin said. "And those people that have grown accustomed over the last two years of working from home and that type of lifestyle, a lot of those people want to continue doing that. And in a tight labor market, if they feel like, 'Well, my employer may not allow me to do that, then there's another employer I can find who will.'"
Loftin said he thinks there are several ingredients already in place that bode well for the Jacksonville office market in 2022 and beyond.
"If we can consistently pick up regional operations centers of companies, in addition to headquarters, every year, that pull down 50,000 to 100,000 square feet each then we are going to continue to see a tightening of some of that vacancy that started to creep up kind of through Covid," Loftin said. "And even with that vacancy being added, because we've been getting transactions done, rates have been going up some, and we think that's going to continue to happen."
The direct asking rent in the Jacksonville office market is at $22.32 per square foot, according to data from JLL.