by Max Marbut
Staff Writer
The topic for the NAIOP Commercial Real Estate Development Association’s Annual “Past Presidents Power Breakfast” was “Downtown Turnaround.”
The event, presented by the Jacksonville Business Journal, was an opportunity for business and property owners, real estate professionals and other Downtown advocates to hear a discussion of current and future local urban core issues.
NAIOP was formerly known as the National Association of Industrial and Office Properties. The breakfast was an event of the Northeast Florida Chapter.
The panel included CB Richard Ellis First Vice President Oliver Barakat; Ron Barton, executive director of the Jacksonville Economic Development Commission; Holland & Knight attorney Robert Riva Jr.; and Toney Sleiman, president and CEO of Sleiman Enterprises.
David Sillick, president and publisher of the Jacksonville Business Journal, moderated the discussion and said the meeting was an opportunity for attendees to network and hear viewpoints on issues relevant to the local commercial real estate industry.
Specific topics covered under the “turnaround” theme ranged from office occupancy and suburban flight to parking and how to attract people Downtown to live, work and play.
“The key to revitalizing Downtown is having a ‘go-to team.’ Who’s in charge? Who’s accountable and responsible?” said Barton, starting the discussion.
Barton cited the tenure of former Downtown Development Authority Executive Director Frank Nero. From 1991-96, Nero served as former Mayor Ed Austin’s deputy mayor for economic development and was senior adviser for economic development during the administration of former Mayor John Delaney.
“There have been periods in Jacksonville’s history when someone had authority and implemented. You have to put your money where your mouth is and stay committed,” said Barton.
A specific issue attracting attention lately is the level of Downtown office space occupancy and the migration of large employers from the urban core to the suburbs. Barakat said it’s important to focus on all of the office space, not just the top-end tower locations.
“Downtown is struggling,” he said. “Anything above 15 percent vacancy is unhealthy. The region is at 22 percent and it’s 25 percent Downtown,” he said.
There’s a larger problem within those numbers.
“The big problem we have is the Class B office space Downtown, which is at 30 percent vacancy,” said Barakat.
Class B office space is in older, smaller buildings which Barakat said suffer from “functional obsolescence and parking issues.”
Riva, who practices real estate and sustainable development law, said the current economic climate has created a certain business relationship between lessors and lessees.
“For the past 18-24 months, tenants have had landlords over the barrel and both of them know it,” he said.
Riva also said that it may be awhile before conditions are favorable to improve redevelopment of Class B office space.
“Renovation will depend on the availability of financing and tenants will have to be comfortable enough about the future to lease large office spaces,” he said.
Barton called Class B space an untapped asset. “It’s an opportunity, not a constraint,” he said.
Barton said some of the available space could be renovated for residential use, possibly to attract more members of the “creative community.”
Sleiman, whose company owns the Landing, said the depression of lease rates isn’t limited to office space. It’s also affecting the retail side of business.
“We’re working with tenants and doing rent concessions. They’re all having a hard time. Rents are down 20 percent or more compared to several years ago,” said Sleiman.
On the subject of a possible new convention center, panelists agreed it would be a good idea and an economic asset.
Sleiman said Jacksonville is the 45th largest city in the country, but ranks 215th in the areas of meeting and exhibit space. He also claimed Jacksonville has “lost 173 convention groups and $383 million in convention business” since 2006.
“Jacksonville hasn’t been in the convention business for a number of years. If we want to be in the convention business, the convention center has to be next to a headquarters hotel,” said Barton.
“That’s the Hyatt,” said Sleiman.
As for parking issues affecting Downtown office occupancy, Barton said that during his career, he has worked in Orlando, Tampa, St. Petersburg and Jacksonville. “I’ve paid for my parking everywhere except Jacksonville,” he said. He uses a City-provided space now.
Barton said incentives up to and including free parking for employees are not the long-term solution.
“We can’t write checks big enough to attract people Downtown if they don’t see value,” he said.
The panel agreed the upcoming elections, which will determine a new mayor and several City Council members, will represent a turning point for Downtown.
Barton said while the mayor can propose policy and guide the process, the council is Jacksonville’s “board of directors” and must be committed to Downtown development.
“It takes the will,” said Barakat. “Does the community and City Council understand that Downtown is critical to the entire area?”
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