by Bradley Parsons
Staff Writer
An increasingly competitive housing market along the banks of the St. Johns River could be a positive sign for downtown office real estate, a City consultant said Tuesday.
Ray Rodriguez, president of the Real Estate Strategy Center of North Florida, said the office real estate market was “headed back toward the central core of Jacksonville.” Rodriguez, who is contracted by the City to study the area’s residential market, said employers would likely follow a residential trend toward downtown relocation.
“When consumers ran for the suburbs so did the office market,” said Rodriguez. “Employers look at consumer trends; where they’re buying. As residents start to relocate toward a central area, it will motivate employers to look to be centrally located.”
The City has made increasing downtown housing a priority and has spent millions in incentives to spur what had been a lagging market. Although 60,000 people work downtown, only about 2,000 live there. There are more than 2,000 residential units planned or under construction.
Early entrants into the market lean toward luxury lifestyles. Waterfront developments like the Plaza at Berkman and The Shipyards offer high–end residences. In 2003, the DDA focused on balancing the market, encouraging market–rate housing to make downtown living more viable across the economic spectrum.
DDA managing director Al Battle said the City had not focused on residences with office space in mind, but he said a more vigorous office market would be a welcome byproduct.
“You see that happen in other downtown revitalizations, where a residential resurgence leads to more people doing business downtown,” said Battle. “If it allows employers to look at downtown as a more favorable environment, it is a positive. There’s something to be said for being able to walk to work every morning.”
Rodriguez offered his own business’ relocation as an example of downtown’s attractiveness. Rodriguez moved his strategy center from the Gate Parkway to a 550 Water Str. office because, “this is where I saw stuff happening.”
The current market offers value, said Rodriguez. He said downtown offices were renting from $16 to $19 per square-foot compared to $20 to $25 at the market’s peak four years ago. That rate compared favorably to similar–sized cities, said Rodriguez, making Jacksonville more attractive to businesses looking to relocate.
Reis Inc., a New York real–estate research firm, reported a national average of $20.64 per square-foot, down from $20.80 in the third quarter of 2003.
The new Duval County Courthouse will help diversify the market when it opens in 2007, said Rodriguez. By consolidating State and County offices under its roof, the courthouse will open up “an abundance of office space,” he said.
The buildings vacated by the offices will attract small businesses, said Rodriguez, 5–to–10–person offices that couldn’t afford space in a high–rise.
Rodriguez’ optimism fits with national projections. Reis predicted the national office market should improve in 2004 after bottoming out last year. Reis projects a 16.5 percent vacancy rate for this year, an improvement of about half a percentage point. Rodriguez said Jacksonville’s rate was about 20 percent.