by Bradley Parsons
Staff Writer
Downtown office renters have sopped up some of the area’s excess supply and look poised to start eating into the market’s record high vacancy rates, according to a report from a leading real estate research firm.
Reis, Inc. reported that in the first half of 2004, downtown’s office inventory is incrementally shrinking while rents are creeping upward. It’s the first time those numbers have headed in a positive direction since the market plunged in the late 1990s. Reis projects both trends to continue through the next several years.
This year, renters have absorbed 64,000 square feet of commercial space. That’s barely a dent in the total inventory, but it compares favorably to the market’s three-year performance. Since 2001, the market has been saddled with the addition of nearly 200,000 square feet of empty office space. Most of the glut was caused by renters leaving the market.
A listing of large-scale renters downtown would read largely the same as a year ago. But several of those tenants have moved into new buildings, eating up more space in the process, said Duke Addison, president of Addison Commercial Realty.
“We’ve seen people moving from one building to another and expanding a little bit,” said Addison.
Addison has noticed rents edging up as supply remains dormant and interest in the market grows. Several market observers said downtown real estate has become more attractive to investors leaving a relatively flat stock market.
Stagnant rents and a stubborn office vacancy rate were areas of concern to City planners this summer. The Jacksonville Economic Development Commission held several discussions with downtown advocates seeking ways to jump start the market.
The JEDC identified a supply glut as the market’s primary ailment. The City has shifted its incentive policy downtown to favor residential development over office buildings.
Addison said the City should keep the door open to City assistance to developers who want to renovate historic buildings.
“Whether you’re talking about providing incentives, grants or making favorable financing available, if a developer wants to turn around a dormant building, or a building that’s run down or not performing like it should be, the City should help those owners.”
Addison can see both sides of the supply-and-demand debate. As a representative for landlords he’d like to see constant supply and climbing rents. On the other hand, his renter clients like additional office development and the lower rents it brings.