By Staff
Residential sales are starting to show some life. But what about commercial?
If, indeed, rooftops follow retail, what’s the situation around the area?
“The commercial market here is mixed and not as bad as one might think,” says one of the area’s veteran commercial Realtors, Jim Citrano, the managing director of the CB Richard Ellis office in Jacksonville.
Two of the major four areas are in reasonably good shape, he says.
“Office leasing is good with absorption numbers rising as vacancy goes down,” said Citrano. “The Industrial market is strong and land sales are as good as I’ve seen in past years due to the strong presence of the port and other drivers such as the rail and highway system.”
But two areas lag behind past performances.
“Retail is sluggish, particularly in centers that used to cater to stores geared to home improvement products,” he said. “Multi housing is really dependent on financing as is other investment property deals. There are buyers and sellers in the marketplace but deals are just harder to close.”
When boiled down to pure numbers, Paul Parsons, an associate for Colliers Dickinson, says that the vacancy rate in the major business hub of downtown Jacksonville is at 10.6 percent and that the total vacant square feet is upwards of 729,000.
Commercial real estate seems to be holding steady in outlying areas of Duval and others in the five-county area.
For instance, the area around the World Golf Village may be showing the promise that developers always have anticipated.
The 800,000-square-foot Lion’s Gate Mall on the southwest corner of I-95 and International Golf Parkway is expected to be under vertical construction later this year. Construction is planned next year on the upscale 1.5-million-square-foot Esplanade at St. Johns mall, which will be patterned after the St. Johns Town Center. And, there soon will be a 90,000-square-foot expansion of the St. Augustine Prime Outlets, which will include a test site for Saks Fifth Avenue.
Office space is the most popular in downtown.
“Office space makes up about 60 to 75 percent of available space,” said Parsons. “Residential spaces take up about 20 percent while retail takes around five to 10 percent.”
“The commercial situation locally is relatively stable and solid with a few isolated individual property concerns, primarily due to overpriced purchase during the top of the market,” said Phil Parsons, Paul’s brother who also is a Colliers Dickinson associate. “If you want to understand Jacksonville and see where the growth is coming from and where we are going, then it is all about the Port of Jacksonville. The Industrial market is great. The Jacksonville Port Authority is doing a great job. Mitsui OSK and Hanjin are the driving force behind the JPA’s growth. Once they are up and running, we will have a hard time keeping up with the infrastructure and work force housing, especially on the north side.
“Obviously, we need to move now with the infrastructure and the city and the Florida Department of Transportation are having quite a challenge finding the money for the improvements. It will be a mess if they don’t move quickly.”
A note of caution comes from the Jacksonville Regional Chamber of Commerce, where the Cornerstone initiative coordinates the business-relocation efforts for the region.
“Business is down from last year and years before,” said Cornerstone executive John Haley. “However, Cornerstone’s book of prospects has been picking up slowly over the last few months. While our unemployment rate is the highest it has been in many years, Jacksonville is still better than many of our peer communities. Some of this has to do with the fact that we tend to be the beneficiary of corporate downsizings of financial services in other areas.
“When corporations need to consolidate operations, they pick locations where they can decrease costs. Jacksonville has a reputation of being an area where employee productivity is high and an consequently we get the consolidation here adding to the local workforce job count.”
Another problem area is getting money.
“The real scary part comes in the financial industry,” said James Cranford of Cranford Silverfield Realty. “Although no one seems to want to talk about it, I think we will see a number of bank failures, which will have a big negative impact on the commercial real estate market, both in real and psychological terms. When this happens, I have concerns about where the economy, both locally and nationally, will head.”
One sign of the potential problem is the plethora of advertisements for high-yielding money market accounts and CDs. When people know that a bank is having difficulty, deposits are hard to keep, said Benjamin Bishop Jr., chairman of Allen C. Ewing Co., a Jacksonville investment banking firm.
“The way they keep them is by paying a rate that’s higher than the market. It’s squeezing all the banks. On top of asset problems, that is making this a difficult period for banks,” Bishop recently told the St. Petersburg Times.
When will the commercial real estate business get better?
“Most of the businesses and economic publications we follow seem to indicate that there is still more economic pain on the horizon and it will probably be 12 to 15 months before we start to see real gains,” said Haley. “We need credit availability to businesses, real estate developers and homebuyers; stability in the markets which will allow investors to plan for the future; and rising home sales to get builders back.”
Cranford goes along with that, saying “I think we have a couple of years of tough times ahead. The residential market will recover first, but a lot is going to depend on the banking situation.
“What do we need to get things back to reasonably normal? Not to have allowed the capital markets to use negligent underwriting practices seven years ago. Where was the federal oversight on these lending practices? And what were all those savvy Wall Street and other investors thinking when they were buying the Securitized loan packages backed by the real estate financed by these loans?”
Finally, the last word to Citrano.
“The market is already getting better,” he said. “The elusive ‘bottom’ may already been hit and a movement up in some sectors is beginning.
“Residential land sales are still problematic and there is still reaction to some speculative developments like the Cameron Kuhn deals that make headlines, but are in the process of finding their way to the surface.
“Whoever wins the election. it will help reduce the uncertainty in the capital markets and a stabilization or reduction in fuel costs and a stronger dollar will help.
“I look for 2009 to start to trend up, particularly in Florida barring a good hurricane season and a break from insurance carriers. This is not the “Perfect Storm” recession predicted to be yet. Banks will get through their write downs, money will flow again and the cycle will start over.
“The question is when and will we discipline Wall Street this time.”