The massive port expansion plans by Asian shipping giants Hanjin and Mitsui O.S.K., (some of which have faced delays) along with the expectations of huge increases in demand for industrial space running to several million square feet, have been major themes in the recent history of the local market. In addition, with the widening of the Panama Canal expected to complete in 2014, plans are afoot to deepen the port so that it may capture its share of post-Panamax shipping. The present state of the market, however, is less favorable. Accordingly, notes the Jacksonville Business Journal in a mid-September report, the “gargantuan,” near-900,000-square-foot NorthPort Logistics Center warehouse “has been empty since it was completed in 2009, a specter of a commercial real estate market that, before the recession, was booming with potential.” “The Jacksonville industrial market,” according to a second quarter report by Cushman & Wakefield, “remains in need of new demand to spur true rehabilitation.”
That said, this source expects the second half of 2012, following a sluggish first half with its “dormant” demand, to show improvement as several transactions, pending as of mid-year, are completed. In addition, notes the Journal, “some of the other industrial projects that were built speculatively have started to fill up in recent weeks.” Tenants planning to occupy empty spaces include JanPak Inc., Sam’s Club, and Union Supply Company Inc. In the JanPak deal, however, occupancy of 84,000 square feet at Crossroads Distribution Center on the Westside (built in 2009 and empty since) will occur at the expense of the evacuation of 90,000 square feet in another nearby park, according to the Journal.
By Reis’ count, the second quarter dealt the 69.1-million-square-foot Jacksonville area warehouse/distribution market a notable setback with net absorption at negative 904,000 square feet, a loss that overwhelmed the 211,000-square-foot positive total seen in first quarter. Vacancy as of mid-year was 16.8%, up 70 basis points from a quarter earlier, down 70 year-over-year. The remainder of the year, however, should show improvement. July followed with positive net absorption at 123,000 square feet and a 10-point drop in the vacancy rate. Additional positive activity is expected. At $3.59 psf and $3.27 psf, second quarter mean asking and effective lease rates were down 0.8% and 0.6% from the quarter before following that quarter’s flat performance. July followed with no additional changes. Not surprisingly, given the elevated vacancy and weak rental profile, construction of competitive space is not a factor at present.
Negative net absorption should continue: the total projected for the second half of the year all told is negative 250,000 square feet. Vacancy should decline while rent growth turns positive in moderate proportion. “[G]reater economic gains—and perhaps political clarity—are needed to truly reactivate the market’s recovery,” observes Cushman & Wakefield. Meanwhile, “future growth prospects continue to exceed current conditions.”