by Bradley Parsons
Staff Writer
Despite a flat real estate market downtown, landlords are asking for, and often getting, comparably high rents for offices overlooking the river.
Commercial real estate firm CB Richard Ellis found that buildings within three blocks of the river fetched $2 more per square-foot than offices in downtown’s interior. In the first half of fiscal year 2004, renters were willing to pay the rates for a river view even when the offices lacked premium accommodations.
“In downtown, a riverfront location clearly supersedes all other characteristics,” according to a CB Richard Ellis progress report.
The report showed riverfront offices getting more than $19 per square-foot from new renters. Away from the water, renters paid a little less than $18.
Even newly renovated buildings in the interior fell short of the demand generated by older buildings on the river.
A consultant hired by the City to evaluate downtown’s housing and commercial markets said riverfront offices bring prestige to their tenants. Ray Rodriguez, president of the Real Estate Strategy Center of North Florida, said a river view provides a “wow factor” similar to wooing clients at a five-star restaurant or championship golf course.
“It’s pretty self-evident. Do you want to talk business looking out at the river, or at the highway?” said Rodriguez. “Businesses are willing to pay, because it gives them an edge in the negotiations process.”
Rodriguez recently moved from a suburban office park to his own riverfront digs in 550 Water Street.
Despite Rodriguez’ move, CB Richard Ellis reported increased demand for suburban offices. That could eventually be good news for downtown landlords. The realtor’s report said a suburban recovery traditionally precedes a turnaround downtown.
The downtown market has not seen significant growth since a boom in the mid-1990s. The economic explosion of that decade drove businesses into offices at a rate not seen before or since.
The office market typically mirrors the economic climate, said Rodriguez.
Just as the demand increase in the 1990s followed booming productivity, employment and earnings, the tepid market now matches an uncertain economic outlook.
“Anybody that buys these spaces is either consumer or financially driven,” he said. “If you look at what the economy’s doing, that’s what the market’s going to be doing.”
The downtown office market has been “treading water” for the last 12 months, according to the report compiled by CB Richard Ellis senior associate Oliver Barakat. The vacancy rate has held steady at 19 percent “with no significant tenant losses or gains impacting the rate.”
Although the beginning of this year witnessed a string of big-money purchases, Barakat wrote that these deals amounted to “musical chairs,” with established renters moving into new space but leaving vacancies behind.
While those deals had a negligible impact on the market as a whole. Barakat noted that many of the renters took up additional space when making the move.
Another positive sign for the market, said Barakat, was a lack of new supply. With little new construction or renovation forecasted for the rest of 2004, the number of available offices should remain fixed or shrink.