by Bradley Parsons
Staff Writer
Over the last two months, a JEDC advisory committee has plotted ways the City can encourage more retail and residences downtown. On the other hand, the committee has looked for ways to reduce an ample supply of commercial space.
Jacksonville Economic Development Commission executive director Kirk Wendland told the committee that the City didn’t want to spend its incentive dollars on office developers. The commercial market’s rents and vacancies have been more or less stagnant since the boom times of the 1990s.
“New construction of office space is not going to be received very well when the (office) vacancy rate is stuck around 16 to 18 percent,” said Wendland.
Wendland’s numbers may actually have understated his case. A recent study by commercial realtor CB Richard Ellis found downtown vacancies holding steady at 19 percent through last year and early 2004. The extra supply has held down rents. A study commissioned by the City earlier this year found area office space renting for as low as $16 a square-foot, down from $20 to $25 at the market’s peak four years ago. The only offices generating near that number are in buildings along the river, where the CB Richard Ellis study found renters paying more than $19.
And even those rents are probably optimistic projections. Commercial landlords are notoriously stubborn to ease rents, but they search for other ways to accommodate potential tenants and to compete in an office market crowded with supply. Jack Garnett, president of Garnett Commercial Real Estate said he’s seen more property managers offering rent–free move-ins and subsidies for office redesigns. These extras cost landlords and drive down the real cost of rents.
To boost those numbers the City needs to do more than stop new construction, said Mike Harrell, board chair of Downtown Vision Inc., who also sits on the Downtown Advisory Committee. Harrell said the City should encourage absorption of the existing glut.
Wendland said the JEDC would likely credit developers searching for incentives if their project eats up some of the available downtown offices. Wendland said the JEDC would not encourage new office construction except in rare circumstances.
Responding to DDA board member David Auchter’s suggestion that the City keep some flexibility within the policy to accommodate corporate relocations like Fidelity National who want to build their own offices, Wendland said some exceptions would be made, but that the JEDC did not want to subsidize construction that would add office space downtown. “If you’re going to build 50,000 square feet and you’re going to use 10,000, you’re adding space to the problem. If a company is going to take up all of it, at least the number isn’t growing,” said Wendland.