by Miranda G. McLeod
Staff Writer
The local residential real estate market has been so good the past several years, the local commercial real estate market is often viewed as lagging far behind. However, according to local commercial Realtors and researchers at the University of Florida, the commercial real estate market in Northeast Florida isn’t just doing OK, it’s growing at a steady pace.
According to the latest Commercial Real Estate Outlook released by the National Association of Realtors, the commercial real estate markets are continuing to grow with record investment and individual sectors in many areas seeing tighter vacancy rates and higher rents.
David Lereah, NAR’s chief economist, said in a statement released from the Washington, D.C. office of NAR, performance varies among the commercial sectors.
“The office and industrial markets continue to shine, supported by job growth and trade, while the rental apartment sector is seeing healthy rent increases,” he said.
James Marrelli, NAR vice president of commercial real estate, also said in a statement from the national office, there is a record flow of capital into commercial real estate.
“We’re setting another record this year for investment in commercial real estate,” he said. “Institutional investors, pension funds and foreign investors have focused on commercial grade properties to diversify portfolio assets with expectations of solid long-term gains.”
Trade with China in particular is impacting demand on both coasts. The positive commercial market coupled with the Mitsui deal at the Jacksonville Port Authority is making the city’s real estate tempting for foreign investors.
“There is more opportunity for the foreign investment than there has been in the past,” said Marlene Millemaci, a commercial and residential Realtor with Keller Williams Realty. “And people from South Florida are moving into North Florida because of higher taxes and the rising cost of insurance there (South Florida).
“There’s an insurgence of cultural investors and it’s significant enough that we want to make sure we can handle those communities correctly.”
Millemaci is also the incoming chair of the Northeast Florida Association of Realtors Multicultural Council, an arm of the association dedicated to providing educational tools for Realtors working with foreign demographics.
Kate Clifford, incoming president of the National Association of Industrial Office Properties Northeast Florida Chapter, has seen those foreign investors first hand.
She said the world wide web, which has made the world not so wide, has been a catalyst for foreign investors to find information about Jacksonville. The media coverage of Jacksonville in the last five years — especially the broadcast of the 2005 Super Bowl which was seen by well over 100 million viewers in the United States and an even bigger international audience — has also brought the local market to the forefront of investors.
Clifford said she is seeing investors from Ireland and South America looking at Jacksonville’s economy and real estate and seeing opportunity.
The United States has a safe economy, she said.
“We’re not in political upheaval. We have a stable government and that’s soothing for international investors,” said Clifford. “Jacksonville is well positioned because of its port, military, industry base and economic development council.”
Chris Morgan of Cantrell and Morgan, a real estate brokerage and consulting firm, said there is a logical progression in the steady pace of commercial real estate.
“There’s been an incredible three to four year run in housing with a lot of absorption in the North Florida area,” said Morgan. “It’s logical for retail to follow those residential developments. Because of all the activity in the past few years, we’re now seeing new neighborhood shopping centers in or near those residential communities.
“What we are seeing, and what we will continue to see, is retail catching up. When you have a lot of residential development, it doesn’t mean (the area) is ready to support power centers or lifestyles centers. It lends itself to neighborhood retail.”
Morgan added that the large communities such as Nocatee in Duval and St. Johns counties and other developments on the north side of Jacksonville, as well as Cecil Commerce Center, are adding to the draw of commercial development.
People don’t want to drive an hour to work and commercial development is moving to where the employment base is, according to Morgan, adding that the St. Johns Town Center and office developments near Baymeadows and the Deerwood areas have allowed a lot of folks to move into north St. Johns County.
“As the employment base shifts southerly, more folks have a better quality of life,” said Morgan. “That helps explain a lot of the absorption in St. Johns County.”
Morgan said another large area development, the recently-opened River City Marketplace near Jacksonville International Airport, is more stimulus for growth.
“River City works because of port activity,” said Morgan. “People can live, work, shop and play without having to come across the bridge.”
Lereah said the fairly steady pace of home sales can be expected nationally for the next two months and although there’s a strong uptrend in the commercial sectors, the rise in the index over the last two quarters shows a lower rate of expansion in comparison with late 2005 and early 2006.
“This mean that commercial sectors will continue to grow, but at a more modest pace,” said Lereah.