by Bradley Parsons
Staff Writer
Despite vacancy rates that compare to historic highs, city planners, developers and commercial realtors see opportunity in downtown’s empty offices.
The formula for more crowded buildings includes a rebounding economy, expanding businesses and Super Bowl–sized exposure to an undervalued downtown market. With one in five offices empty, businesses looking to expand their presence to the city’s core will find plenty of options and landlords who are eager to please, said Jack Garnett, president of Garnett Commercial Real Estate.
“There are some good bargains to be had downtown for good, quality space,” said Garnett.
Although notoriously stubborn to ease rents, Garnett said commercial landlords were searching for other ways to accommodate potential tenants. Garnett said he had seen more property managers offering rent–free move–ins and subsidies for office redesigns in an effort to attract renters. Landlords depend on their rental rates when they sell or refinance, said Garnett, and are reluctant to hurt their on–paper bottom line.
“Landlords like to hold rents as stable as possible, but you’ll see them stretching in other areas like free rent or tenant improvement dollars,” said Garnett. “Rents drive your value when you refinance, so they’re always hesitant to reduce rents. They’d rather give up those dollars up front.”
Despite the reluctance of property owners, independent studies have found rates inching down. A city real–estate consultant recently found office space renting for $16 to $19 per square foot, compared to $20 to $25 at the market’s peak four years ago.
The favorable market has so far not produced renters for Garnett’s sole client downtown. Recently redeveloped 100 Laura Street has just one tenant, a computer company on the third floor. However, Garnett said he was pleased with the level of interest in the building and said he was close to signing several tenants.
Developer Mike Langton said the vacancy rates were driving down the market. He said he got “a very, very good rate” on his lease in the W.A. Knight Building on West Adams Street. Although lower rates cause landlords headaches, Langton said the market should prove attractive to business owners looking to relocate.
“It should encourage relocation; rents are low, people should be taking a second look downtown,” said Langton.
Langton has an option to buy Laura Street’s Barnett Bank, but his plans for redevelopment focus on the residential market, blending lofts and a hotel with a restaurant and bank. The so–called mixed–use developments have become the trend downtown.
Together with large–scale residential projects like The Shipyards, mixed–use developments like the Southbank’s proposed San Marco Place should double downtown’s 2,000–person residential population.
Real estate consultant Ray Rodriguez, president of the Real Estate Strategy Center of North Florida, said the residential market could eventually drive an improved commercial market.
“Employers look at consumer trends; where they’re buying,” said Rodriguez. “As residents start to relocate toward a central area, it will motivate employers to look to be centrally located.”