“As the Jacksonville economy gains strength,” reports Marcus & Millichap, “the retail landscape is changing, especially among grocery stores” (see Special Real Estate Factors). In addition, empty big-box stores are being filled by fitness centers while other retailers, including REI and Del Taco, “are bullish on Jacksonville’s retail outlook, and opening their first Florida stores in the metro.”
What the Jacksonville Business Journal described in September as a “coup for Northeast Florida,” high-end department store retailer Nordstrom has announced plans for a 124,000-square-foot store at St. John’s Town Center. Built several years ago, when the local economy was stronger, this regional-scale project from Simon Property Group and Ben Carter Properties, which proved a magnet for retail development in the area, was a major step in the advancement of Jacksonville to the national retail stage at the time. Conditions, of course, have changed since. “There’s a million retailers out there that would never even consider looking at Jacksonville,” an executive with Franklin Street informed this source. “And now you have Nordstrom coming, and I think that makes a huge difference. What retailers do is follow other retailers, and the big guys do a lot more due diligence when they’re looking to come into a market.” PRNewswire reports a fall 2014 opening date for the new department store. The store “will anchor a new wing on the southwest side of the 1.1-million-square-foot, open air center.”
Alongside these favorable items, the 22.8-million-square-foot community-neighborhood shopping center sector tracked by Reis continues to struggle. Four consecutive years of negative net absorption accompanied eventually by a complete halt to construction were followed by additional losses year-to-date in 2012. The total for the first half of the year was minus 46,000 square feet. Vacancy closed the second quarter at 12.8%, up 10 basis points for the period, down 10 year-over-year and 200 points higher than the second quarter national rate for this property category.
While July followed with 15,000 feet of positive net absorption and a 10-point drop in vacancy, the downward trend in occupancy has not yet come to an end: additional losses and increases in the vacancy rate are expected for the remainder of the year. While the loss trend in rents may have ended, weakness persists. At $15.19 psf and $12.45 psf, second quarter asking and effective averages were each down 0.1% for the period and were up 0.1% and unchanged, respectively, since year-end—following losses at close to 1.0% in 2011. Each rate added a penny in July. Current retail construction metrowide, meanwhile, consists solely of the 20,000- square-foot second phase of the Tapestry Park mixed-use center. Major projects remain in the planning pipeline in St. Augustine.
Negative net absorption at about 26,000 square feet through the final five months of the year should bring the community-neighborhood center market vacancy rate to 12.9%. Minimal positive growth is expected for the average rents in this sector for the year. As indicated, however, the area remains attractive to some major retailers.