The project also seems to occupy the epicenter of Jacksonville’s most encouraging trend in commercial real estate — the recovery of retail and the launch of mixed-use projects Downtown.
“It’s the most brilliant development I’ve seen. I love everything about it,” said Stanton Hudmon of Pine Street/RPS, a commercial real estate firm. “I thought industrial real estate would be the first to come back from the recession. But, retail has been the strong force.”
When the housing market collapsed in 2008, it sucked the air out of commercial real estate as well.
As other major commercial markets in Florida recovered years later, Jacksonville’s lagged. But by 2013 Jacksonville had turned a corner. Every commercial sector now shows signs of life.
While commercial Realtors use phrases like “inventory absorption” and “lower vacancy” to describe improving industrial and office markets, to describe retail, they point to a list of projects in the works.
“During the recession, building just stopped, because companies were contracting instead of expanding,” Hudmon said. “Now you’ve got projects popping up in Brooklyn that are exciting stuff, with expensive rents in the $30 per-square-foot range.”
The River City Marketplace near the airport on the Northside continues to spur new development, most recently attracting Dick’s Sporting Goods and Marshalls to the Parkway Shops.
The St. Johns Town Center on the Southside is slated by the end of 2014 to complete its third phase of construction, which will be anchored by high-end retailer Nordstrom.
Companies are buying old shopping centers and populating them with new outlets, like Walmart Supercenters.
And, in the Downtown surrounding neighborhoods of Brooklyn, Avondale and San Marco, developers have moved forward on mixed-use projects that combine trendy shops and restaurants with apartments and condos.
Downtown the next big thing in retail?
Though it’s St. Johns County that today posts the strongest retail statistics, Hudmon is betting Downtown will become the next big thing in retail.
Retail was headed out of town before the recession to the “green” zone in the suburbs, he said. Then last year the city changed how it charges developers for impacts to roads, now rewarding construction Downtown. That and the emerging millennials market will drive development pressure back to the urban core, Hudmon said.
“People want to live, work and shop close to the same area,” he said. “Generation Y — 20-year-olds and younger families — they want healthy foods and cool retail, and they’re demanding it.”
Brooklyn and Riverside are places that are delivering.
In 2012 Jonathan Insetta and Allan DeVault opened Black Sheep, built on a triangle parcel at Five Points in Riverside.
The farm-to-table restaurant features a trendy open-air rooftop bar and two floors of office space.
Jacksonville-based Regency Centers plans to develop a new shopping center in Brooklyn, anchored by organic grocer Fresh Market. And Coley, a principal at Hallmark Partners, has promised the retail portion of 220 Riverside will host restaurants run by world-class master chefs.
220 Riverside brings ‘cool’ factor
Mixed-used projects have catalyzed urban revival in other cities. Of Jacksonville’s pending mixed-use projects, none are more forward thinking than Coley’s 220 Riverside, Hudmon said.
The development combines retail shops and apartments with an events venue — giving full meaning to the credo of live-work-play.
Coley envisions a bistro area serviced by food carts, an outdoor library, yoga classes on the lawn and open air concerts featuring name acts, like Sheryl Crow.
A public entertainment zone wasn’t part of the plan when Hallmark bought the 11-acre parcel near the intersection of interstates 10 and 95 a decade ago.
“We thought it would be a very nice office building with a hotel attached to it,” Coley said.
It was during the darkest hour of the recession that the company pivoted to a project with a higher “cool” factor.
Hallmark brought in Bristol Development Group, a Tennessee company that had developed dozens of live-work-play projects nationally. The new partner instantly saw Jacksonville’s potential.
“Just on the other side of the interchange is Riverside, one of the top three historic districts in the country,” Coley said. “And we’re so close to Downtown, with its 50,000 office workers. We are the hinge between that and that.
“There were 8,000 office workers within six blocks of this site and there was not one residential unit. Now there are 600 under construction.”
If urban pioneers lay their heads on pillows in Brooklyn by the hundreds or, one day, thousands, could they seep into Jacksonville’s Northbank as well? Coley doesn’t think so.
“It takes a certain scale to create a neighborhood like this and we’re not going to be able to achieve that within a circle around the Wells Fargo tower,” Coley said.
In other live-work-play cities like Austin, Texas; Portland, Ore.; and Charlotte, N.C., the real residential development didn’t begin at the intersection of Main and Main, Coley said.
It grew in Downtown’s “second ring” a few miles out. Residents there activated Downtown’s venues.
“We can have 10,000 residential units here in Brooklyn alone,” Coley said. “It would ignite the Landing. It would completely make our Downtown. I think Springfield is capable of that, I think Southbank is capable of that.”
Industrial real estate slowly climbs
In industrial real estate, the single ray of light in recent years has been that empty warehouses, distribution and manufacturing centers are starting to fill with tenants.
But meaningful new construction still waits on a far distant horizon, said Peter Anderson, vice president of Pattillo Industrial Real Estate, the largest industrial real estate company in North Florida.
“The user demand for new space has just not returned yet,” he said. “We’ve been vigorously active in re-tenanting properties that became vacant during the recession, and we are slowly making progress. But, we’re not at the occupancy levels or the rent levels yet that would sustain speculative construction.”
Since peaking at 12 percent in 2010, industrial property vacancy in Jacksonville has steadily fallen to 9.2 percent, according to CoStar a market research company for commercial real estate. But rents have yet to climb from their recessionary average of $4 per square foot.
Jacksonville has a number of good, quality buildings that sat vacant after 2008 and that are finally being absorbed, Anderson said. In 2013, the market also saw a lot of older industrial buildings being purchased and rehabbed.
When demand for new industrial construction does return, four sites at the metro area’s outlying regions stand poised to accept projects.
Cecil Commerce Center on Jacksonville’s Westside and the 2,000-acre Crawford Diamond Industrial Park in Nassau County are ideal for the kind of manufacturing and aerospace mega-projects the state is working to attract, Florida Secretary of Commerce Gray Swoope has said.
Near the Southside’s soon- to-be-finished Florida 9B highway, the Davis family said it will create an employment center consisting of 241 acres for commercial, industrial, office and retail development.
In St. Johns County at the intersection of I-95 and Florida 207, St. Johns Marketplace LLC has said it will develop more than 1 million square feet of commercial and industrial space.
Office growth driven by employment
Like industrial property, Jacksonville has shown little appetite for new office construction post-recession. But employment gains are now filling office buildings in every market, said Tarik Bateh, vice president of Capital Markets for JLL, a real estate investment firm.
“Today, we have more leased and occupied office space than we’ve ever had in the history of Jacksonville (at more than 54 million square feet),” he said. “We’re seeing businesses starting to spend more money on capital investment and more money on people. It’s not accelerating quite like we’d all like to see it, but it’s happening.”
Jacksonville finished 2013 with an unemployment rate of 5.6 percent, its lowest level since before the recession. A large chunk of the city’s job growth has been in the financial services sector, which is arguably Jacksonville’s biggest office-using industry, Bateh said.
Vacancies for office buildings have fallen steadily from an average regional peak of 16 percent in 2009 to 12.7 percent in 2013, according to CoStar statistics. Rents have finally showed slight improvement, ending up 50 cents higher in 2013, at $17.39 per square foot.
Downtown and the Southside dominate Jacksonville’s office building landscape, Bateh said. The growth in occupancy has cut across both neighborhoods, as well as across every class of building.
“Class A (newer buildings) by and large are performing well, both Downtown and in the suburbs,” Bateh said, “but we’re also seeing increasing occupancy in Class B (older) buildings. I think Downtown will continue to strengthen and I think we’re going to see growth in rents.”
Alex Coley often says his Brooklyn apartment complex at 220 Riverside, with its full floor of restaurants and retail, and its events venue, Unity Plaza, will serve as an epicenter for everything that’s cool and creative about Jacksonville.